SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the nine month period ended May 31, 1995 or
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act 1934
For the transition period from to
Commission file number: 0-17005
DEKALB Genetics Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-3586793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sycamore Road, DeKalb, Illinois 60115
(Address of principal executive offices) (Zip Code)
815-758-3461
(Registrant's telephone number,
including area code)
Indicate whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Title of class Outstanding as of May 31, 1995
Class A Common, no par value 792,376
Class B Common, no par value 4,371,332
Exhibit index is located on page 2
Total number of pages 60
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
INDEX
Page No.
Part I - Financial Information (Unaudited except for the
Condensed Consolidated Balance Sheet as of August 31, 1994):
Management's Discussion and Analysis of Financial Condition
and Results of Operations 3-5
Condensed Consolidated Statements of Operations for the nine
months ended May 31, 1995 and 1994 6
Condensed Consolidated Statements of Operations for the three
months ended May 31, 1995 and 1994 7
Condensed Consolidated Balance Sheets, May 31, 1995 and 1994
and August 31, 1994 8
Condensed Consolidated Statements of Cash Flows for the nine
months ended May 31, 1995 and 1994 9
Notes to Condensed Consolidated Financial Statements 10-11
Part II - Other Information 12
EXHIBIT 10 - Sales Agreement with Central Farms of America, Inc. 13-58
EXHIBIT 11 - Computation of Net Earnings per Common and Common
Equivalent Share for the nine months ended May 31, 1995
and 1994 and for the three months ended May 31, 1995 and 1994. 59-60
<PAGE>
<PAGE> Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Financial Position
Net earnings from continuing operations for the first nine months of fiscal
1995 were $10.7 million ($2.03 per share) compared with $10.3 million ($1.98
per share) for the same period of the prior year. Excluding an after-tax
benefit of $2.1 million ($.40 per share) related to the suspension of the
defined benefit portion of the Company's retirement program, net earnings from
continuing operations in fiscal 1994 were $8.2 million ($1.58 per share). The
$2.5 million increase in earnings from continuing operations was due to a
significant improvement in seed segment earnings partly offset by lower swine
segment profitability and a higher tax rate.
Net earnings of $11.9 million ($2.27 per share) for fiscal 1995 included a
$1.2 million ($.24 per share) gain from the disposition of the Company's
poultry business segment. Fiscal 1994 net earnings of $9.4 million ($1.80 per
share) included a $0.5 million loss ($.10 per share) from discontinued
operations and an expense of $.4 million ($.09 per share) related to adopting
the new standard of accounting for income taxes.
Consolidated revenues in fiscal 1995 were $294.3 million compared with $276.9
million the prior year. The six percent increase was primarily due to higher
North American and Argentine corn selling prices and sales volumes. Swine
revenues decreased nearly 12 percent as the result of lower market hog prices
and reduced male genetic revenues.
Fiscal 1995 third quarter net earnings from continuing operations were up
significantly over the same period a year ago. Excluding the benefit related
to the retirement program ($1.1 million or $.20 per share) prior year third
quarter earnings were $1.2 million compared with $3.6 million in the third
quarter of fiscal 1995. North American seed earnings increased due to higher
corn margins while lower market hog prices caused the swine segment to report
a $0.1 million loss compared with $2.8 million of earnings in the third
quarter of fiscal 1994. International seed segment earnings increased due to
higher royalty income from Europe.
Quarterly Industry Segment Revenues and Earnings (In Millions)
(Unaudited)
Third Quarter Year-to-Date
May 1995 May 1994 May 1995 May 1994
Revenues:
North American Seed $ 75.5 $ 73.5 $191.0 $181.1
International Seed 17.6 14.4 67.7 55.4
Swine 11.8 14.3 35.6 40.4
Total Revenues $104.9 $102.2 $294.3 $276.9
Earnings:
North American Seed $ 6.2 $ 4.0 $ 20.2 $ 13.0
International Seed 2.9 (0.4) 8.3 5.5
Swine (0.1) 2.8 (1.4) 5.5
Total Operating Earnings 9.0 6.4 27.1 24.0
General corporate expenses (0.7) (1.4) (3.2) (4.1)
Net interest expense (2.4) (2.0) (6.7) (5.8)
Earnings from continuing operations
before income taxes and accounting change 5.9 3.0 17.2 14.1
Income tax provision 2.3 0.8 6.5 3.8
Earnings from continuing operations before
cumulative effect of accounting change 3.6 2.2 10.7 10.3
Discontinued Operations:
Gain/(Loss) from operations, net of tax 0.1 - (0.5) (0.5)
Gain on disposition, net of tax 1.7 - 1.7 -
Earnings before cumulative effect
of accounting change 5.4 2.2 11.9 9.8
Cumulative effect of accounting change - - - (0.4)
Net Earnings $ 5.4 $ 2.2 $ 11.9 $ 9.4
<PAGE>
<PAGE>
North American Seed
North American seed segment earnings for the first nine months of fiscal 1995
were $7.2 million higher than a year earlier as revenues increased $9.9
million or six percent. Higher average selling prices for corn and an
increase in soybean sales volume generated the revenue increase. The average
selling price for corn was 7% higher, primarily due to an improved sales mix.
Improved earnings were largely the result of the higher corn selling prices
and lower unit costs. As a result of the large production crop harvested last
fall following very favorable growing conditions during the summer of 1994,
margin per unit improved over $8.00 per unit. Fiscal 1995 corn sales volume
is expected to be up over a year ago despite a nine percent reduction in corn
planted acreage. However, returns have yet to be finalized due to the rain-
delayed planting season.
Soybean sales volume was higher in the current year nine months due to
increased demand for DEKALB's product combined with higher soybean planted
acreage. As corn planted acreage decreased four percent from planting
intentions, farmers were forced to plant alternative crops, including
soybeans, most of which occurred after May 31.
North American seed segment earnings for the third quarter of fiscal 1995 were
$2.2 million higher than last year largely due to higher corn margins.
International Seed
International seed segment earnings for the first nine months were $2.8
million higher than a year ago. Increased royalty income from Western Europe
and higher earnings in Argentina were partly offset by lower equity earnings
from Mexico and lower royalty earnings in Eastern Europe. Argentine corn
operations rebounded from the adverse growing conditions last year and
experienced higher average selling prices and volume in the current year. On
the other hand, in Mexico, drought and the lack of agricultural credit due to
the devaluation of the peso significantly reduced corn sales opportunities. In
addition, seed corn production in Mexico was substantially below target,
increasing production cost per unit. These two factors, coupled with higher
interest costs, caused earnings from our joint venture in Mexico to decrease
nearly $2.0 million.
Third quarter international seed segment earnings increased $3.3 million in
fiscal 1995 compared with the same period of fiscal 1994. Argentine earnings
improved over the prior year third quarter and French royalty income was
higher than a year ago.
Swine
Swine segment results for the first nine months were $6.9 million lower than a
year earlier as revenues decreased 12 percent. The revenue decrease resulted
from lower market hog prices combined with lower male genetic revenues which
resulted from weak demand for boars. Market-driven prices caused revenues
from the female lines of the breeding stock business to be flat, even though
sales volume increased.
Since over 40 percent of DEKALB's sales volume is by-product market hogs,
lower market prices have a direct impact on profitability. Average market hog
prices for the nine months dropped almost $11.00 per hundred weight ($37.98
vs. $48.86) from a year ago, causing swine to report a loss of $1.4 million in
the first nine months of fiscal 1995 compared with earnings of $5.5 million
in the same period of fiscal 1994. Swine earnings are not expected to improve
significantly by the end of the fiscal year. Although hog prices are
improving in the fourth quarter, breeding stock demand has softened.<PAGE>
<PAGE>
Third quarter swine segment earnings were $2.9 million less than the prior
year third quarter due to lower market hog prices and lower boar sales volume.
Market hog prices for the current quarter averaged nearly $39 per hundred
weight compared with $49 a year ago.
General
The effective tax rate increased from 28 percent in the first nine months of
fiscal 1994 to 38 percent for the same period in fiscal 1995. A change in the
earnings mix, primarily the loss in Mexico, was the principal factor causing
the increase. For each interim period, the tax rate is determined from an
estimate of full year earnings and the resultant tax. The first nine months
of fiscal 1994 included increased tax benefits associated with international
seed losses incurred in prior years.
First quarter fiscal 1994 net earnings reflected the adoption of Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes". The cumulative effect of this accounting change was an after-tax
charge to net earnings of $0.4 million ($.09 per share).
In October 1993, the Board of Directors approved management's suspension of
the defined benefit portion of the Company's retirement program. The
cumulative effect on continuing operations of this suspension through the
third quarter of 1994 was a benefit of $2.1 million after-tax.
On April 28, 1995, the Company sold the stock of its wholly-owned poultry
subsidiary to Central Farm of America, Inc., an affiliate of Toshoku, LTD., a
Tokyo-based trading company specializing in food and food products. A gain of
$1.7 million, after-tax, was recorded as a result of the sale while
discontinued operations reported a loss of $0.5 million, after-tax, for the
nine month period. Net proceeds from the sale provided over $10 million in
cash to be reinvested in the Company's seed and swine businesses.
Fourth quarter will primarily reflect swine operating results and corporate
and interest expenses plus adjustments related to estimated full year seed
returns and expenses recorded through the first nine months. Prior year
fourth quarter results also included earnings from the poultry business and
international seed royalty recognition due to contract changes, neither of
which will occur in the current year fourth quarter.
Financial Position
During the first nine months of fiscal 1995, net cash outflow from operations
was $21.0 million greater than a year ago. Cash requirements for increased
seed production costs associated with the 1994 seed crop caused the change.
Cash requirements for the first nine months were provided by earnings and
existing short-term credit facilities. Committed credit lines include a $50
million revolving credit facility through December 31, 1997 and a $20 million
facility available through November 26, 1995. These agreements contain
various restrictions on the activities of the Company as to maintenance of
working capital and tangible net worth, amount and type of indebtedness, and
the acquisition or disposition of capital shares or assets of the Company and
its subsidiaries.
Management believes its operating cash flow and existing lines of credit are
sufficient to cover normal and expected working capital needs, capital
expenditures, dividends and debt maturities.
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended May 31, 1995 and 1994
(Dollars in millions except per share amounts)
(Unaudited)
May May
1995 1994
<S> <C> <C>
Revenues 294.3 276.9
Cost of revenues 148.5 151.3
GROSS MARGIN 145.8 125.6
Selling expenses 60.9 54.7
Research and development cost 37.3 36.0
General and administrative expense 20.9 14.2
119.1 104.9
OPERATING EARNINGS 26.7 20.7
Interest expense, net of interest income of
$0.3 in 1995 and $0.2 in 1994 (6.7) (5.8)
Other expense, net (2.8) (0.8)
Earnings from continuing operations before income taxes and
accounting change 17.2 14.1
Income tax provision 6.5 3.8
Earnings from continuing operations before cumulative effect
of accounting change 10.7 10.3
Discontinued Operations
Loss from operations, net of tax (0.5) (0.5)
Gain on disposition, net of tax 1.7 -
Earnings before cumulative effect of accounting change 11.9 9.8
Cumulative effect of accounting change - (0.4)
NET EARNINGS $ 11.9 $ 9.4
Earnings per share from continuing operations before
cumulative effect of accounting change $ 2.03 $ 1.98
Discontinued Operations:
Loss from operations, net of tax (0.08) (0.09)
Gain on disposition, net of tax 0.32 -
Earnings per share before cumulative effect of accounting change 2.27 1.89
Cumulative effect of accounting change - (0.09)
NET EARNINGS PER SHARE $ 2.27 $ 1.80
Dividends per Share $ 0.60 $ 0.60
The accompanying notes are an integral part of the financial statements.
-6-
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended May 31, 1995 and 1994
(Dollars in millions except per share amounts)
(Unaudited)
May May
1995 1994
<S> <C> <C>
Revenues 104.9 102.2
Cost of revenues 50.6 55.8
GROSS MARGIN 54.3 46.4
Selling expenses 24.7 21.6
Research and development cost 14.4 14.2
General and administrative expense 7.1 5.9
46.2 41.7
OPERATING EARNINGS 8.1 4.7
Interest expense, net of interest income of
$0.1 in 1995 and 1994. (2.4) (2.0)
Other income, net 0.2 0.3
Earnings from continuing operations before income taxes 5.9 3.0
Income tax provision 2.3 0.8
Earnings from continuing operations 3.6 2.2
Discontinued Operations:
Earnings from operations, net of tax 0.1 -
Gain on disposition, net of tax 1.7 -
NET EARNINGS $ 5.4 $ 2.2
Earnings per share from continuing operations before
cumulative effect of accounting change 0.68 0.43
Discontinued operations:
Earnings from operations, net of tax 0.02 -
Gain on disposition, net of tax 0.32 -
NET EARNINGS PER SHARE $ 1.02 $ 0.43
Dividends per Share $ 0.20 $ 0.20
The accompanying notes are an integral part of the financial statements.
-7-
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
May 31, 1995 and 1994 and August 31, 1994
(Dollars in millions)
(Unaudited)
May May August
1995 1994 1994
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ($2.5) $1.6 $6.2
Notes and accounts receivable, net of allowance for
doubtful accounts of $2.4 at May 31, 1995, $2.0 at
May 31, 1994, and $2.2 at August 31, 1994 109.8 106.2 44.4
Inventories (Note 2) 89.6 82.5 99.4
Deferred income taxes 4.3 5.0 4.3
Other current assets 4.0 6.4 7.0
Total current assets 205.2 201.7 161.3
Investments in and advances to related companies 2.9 6.7 8.0
Intangible assets 40.3 41.7 41.3
Other assets 3.6 9.3 8.9
Property, plant and equipment, at cost 237.5 226.4 230.8
Less accumulated depreciation and amortization (139.7) (134.0) (135.1)
Net property, plant and equipment 97.8 92.4 95.7
Total assets $349.8 $351.8 $315.2
Current liabilities:
Notes payable $59.7 $69.1 $45.1
Accounts payable, trade 3.4 5.7 6.4
Other accounts payable 7.2 11.2 13.2
Other current liabilities 52.6 42.4 27.7
Total current liabilities 122.9 128.4 92.4
Deferred compensation and other credits 5.6 5.3 5.4
Deferred income taxes 9.0 11.9 11.1
Long-term debt, less current maturities 85.0 85.1 85.0
Commitments and contingent liabilities (Note 4)
Shareholders' equity:
Capital stock:
Common, Class A; authorized 5,000,000 shares 0.1 0.1 0.1
Common, Class B; authorized 15,000,000 shares 0.4 0.4 0.4
Capital in excess of stated value 80.8 80.0 80.1
Retained earnings 54.5 45.7 45.8
Currency translation adjustments (Note 3) (6.0) (2.7) (2.7)
129.8 123.5 123.7
Less treasury stock, at cost (2.5) (2.4) (2.4)
Total shareholders' equity 127.3 121.1 121.3
Total liabilities and shareholders' equity $349.8 $351.8 $315.2
The accompanying notes are an integral part of the financial statements.
-8-
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 1995 and 1994
(Dollars in millions)
(Unaudited)
May May
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $11.9 $9.4
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation and amortization 8.2 8.1
Equity earnings, net of dividends 1.7 1.3
Cumulative effect of accounting change - 0.4
Provision for deferred income taxes 1.1 1.5
Provision for inventory valuation 11.0 10.0
Loss from discontinued operations 0.5 0.5
Gain on disposition of discontinued operations (1.7) -
Other 0.1 0.7
Changes in assets and liabilities:
Receivables (66.0) (73.3)
Inventories (1.2) 23.9
Other current assets 0.6 (0.3)
Accounts payable (9.0) 5.6
Accrued expenses 18.7 13.1
Other assets and liabilities 2.3 (1.7)
Net cash flow from operating activities ($21.8) ($0.8)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (9.7) (12.2)
Proceeds from sale of property, plant and equipment 0.8 0.6
Proceeds from sale of discontinued operations 12.5 -
Cash from (used by) discontinued operations (2.5) (0.3)
Net cash flow from investing activities $1.1 ($11.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing debt 14.6 14.1
Principal payments made on debt - (0.2)
Dividends paid (3.1) (3.1)
Other 0.5 0.1
Net cash flow from financing activities $12.0 $10.9
Net effect of exchange rates on cash - (0.1)
Net decrease in cash and cash equivalents (8.7) (1.9)
Cash and cash equivalents at August 31 6.2 3.5
Cash and cash equivalents at the end of May ($2.5) $1.6
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes $5.0 $2.0
Interest $6.7 $5.5
The accompanying notes are an integral part of the financial statements.
-9-
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated financial statements included herein are presented in
accordance with the requirements of Form 10-Q and consequently do not
include all of the disclosures normally required by generally accepted
accounting principles or those normally made in the Company's annual Form
10-K filing. In order to facilitate a better comparison of the highly
seasonal seed operations of the Company, a Condensed Consolidated Balance
Sheet at May 31, 1994 is included herein as part of the condensed
consolidated financial statements.
The results presented are unaudited but include, in the opinion of
management, all adjustments of a normal recurring nature necessary for a
fair statement of the results of operations and financial position for the
respective interim periods.
Certain costs and expenses incurred in the North American and international
seed businesses are charged against income as sales are recognized for
interim reporting purposes. The Company believes this method more closely
matches revenues with expenses and results in more comparability of
reporting periods within the year. Since there are only minor North
American seed sales recorded in the first and fourth quarters, this method
defers first quarter expenses related to sales which will occur later in
the year, primarily in the second quarter; it also anticipates expenses
incurred in the fourth quarter, primarily in the third quarter. Southern
hemisphere international seed sales occur largely in the first and second
quarters and this same method anticipates future expenses from the third
and fourth quarters and matches them against the first and second quarter
revenues.
2. Inventories, valued at the lower of cost or market (in millions), were as
follows:
May May August
1995 1994 1994
Commercial seed $ 78.6 $ 70.5 $ 88.1
Commercial swine 7.8 8.1 8.1
Supplies and other 3.2 3.7 3.2
$ 89.6 $ 82.5 $ 99.4
3. Effective in fiscal 1995, the Company accounts for translation of foreign
currency in countries formerly considered hyperinflationary in accordance
with Statement of Financial Accounting Standards No. 52 (SFAS No. 52),
"Foreign Currency Translation." Foreign-currency assets and liabilities
are translated into their U.S. dollar equivalents based on rates of
exchange prevailing at the end of the respective period. Translation
adjustments resulting from translating foreign currency financial
statements of consolidated subsidiaries into their U.S. dollar equivalents
are reported separately and accumulated in a separate component of
stockholders' equity. The following summarizes the activity in the
translation adjustment account:
(In millions)
May May
1995 1994
Balance at September 1 $(2.7) $(2.5)
Translation gain/(loss) (3.3) (0.2)
Balance at end of May $(6.0) $(2.7)
<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
Aggregate exchange gains and losses arising from the translation of foreign
currency transactions in other than the functional currency of the
particular entity are included in income.
4. The Company and its subsidiaries are defendants in various legal actions
arising in the course of business activities. In the opinion of
management, these actions will not result in a material adverse effect on
the Company's consolidated operations or financial position.
Most potential property losses are self-insured.
5. In October 1993, the Board of Directors approved management's suspension of
the defined benefit portion of the Company's retirement program. The
cumulative effect of this suspension through the third quarter of 1994 was
a benefit of $2.3 million after-tax, including $0.2 million related to
discontinued operations.
6. Effective September 1, 1993, the Company changed its method of accounting
for income taxes by adopting the provisions of Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes".
SFAS 109 requires a change from the deferred method of accounting for
income taxes under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates
expected to apply in the years in which the temporary differences are
expected to reverse.
The adoption of SFAS 109 resulted in the recognition of $0.4 million, $.09
per share, of deferred tax expense. This amount was included as a charge
to net earnings as the cumulative effect of change in accounting principle
in the first quarter of fiscal 1994.
7. Certain corporate expense reclassifications have been made for segment
comparability purposes. These reclassifications had no effect on net
earnings.
In addition, during the current quarter, the Company began deferring
certain costs associated with its swine licensing business.
8. On April 28, 1995 the Company sold its poultry operations to Central Farm
of America, Inc., an affiliate of Toshoku, Ltd., for $12.5 million in cash.
Accordingly, the poultry business is reported as a discontinued operation
and the consolidated financial statements have been reclassified to report
separately the net assets and operating results of the business. The
Company's operating results for prior years have been restated to reflect
continuing operations.
Net earnings from discontinued operations for the nine months included an
operating loss of $0.5 million, net of $0.5 million tax benefit and a net
gain on the sale of $1.7 million, net of $0.5 million tax expense.
Revenues for discontinued operations were $12.1 million in fiscal 1995 and
$14.3 million in fiscal 1994. Net assets of the discontinued operations at
May 31, 1995 consist primarily of current assets amounting to $0.7 million.
<PAGE>
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are defendants in various legal actions
arising in the course of business activities. In the opinion of
management, these actions will not result in a material adverse effect on
the Company's consolidated operations or financial position.
Item 6. Exhibits and Reports on Form 8-K Page
(a) Exhibit 10 - Sales Agreement dated April 28, 1995 between
Central Farm of America, Inc. and DEKALB
Genetics Corporation 13-58
Exhibit 11 - Computation of Net Earnings per Common and
Common Equivalent Share 59-60
(b) Reports on Form 8-K - In a report filed on Form 8-K dated April 18, 1995,
the Company reported the dismissal of its external
auditors.
- In a report dated April 28, 1995, the Company
reported the sale of its poultry business.
- In a report dated June 9, 1995, DEKALB reported the
engagement of new external auditors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEKALB Genetics Corporation
Date: July 12, 1995 Thomas R. Rauman
(Signature)
Thomas R. Rauman
Vice President-Finance,
Chief Financial Officer
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of this 28th day of April, 1995, by and between Central Farm of America Inc.,
a Delaware corporation ("Buyer"), and DEKALB Genetics Corporation, a Delaware
corporation ("Seller").
RECITALS
WHEREAS, Seller owns one hundred percent (100%) of the issued and
outstanding shares of capital stock of DEKALB Poultry Research Inc., a
Delaware corporation (the "Company"); and
WHEREAS, upon the terms and conditions hereinafter set forth, Buyer
wishes to purchase from Seller, and Seller wishes to sell to Buyer, one
hundred percent (100%) of the issued and outstanding shares of capital stock
of the Company;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 Accounts Receivable is defined in Section 3.16.
1.2 Acquisition Agreements means the Facility Lease (as defined in
Section 5.11 below), the DEKALB License (as defined in Section 5.12 below),
the Services Agreement (as defined in Section 5.13 below) and the Non-
Competition Agreement (as defined in Section 5.10 below).
1.3 Affiliate means a person or entity that directly, or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person or entity specified. For purposes of this
Section 1.3, "control" shall be defined as (a) fifty percent (50%) common
equity ownership, or (b) the ability to direct the management or policies of a
company, whether by contract or otherwise.
1.4 Affiliated Group means any affiliated group within the meaning of
Code Section 1504 or any similar group defined under a similar provision of
state, local or foreign law.
1.5 Assignment and Assumption Agreement is defined in Section 5.16.
1.6 Buyer is defined in the introductory paragraph.
1.7 Closing means the consummation of the purchase and sale of the
Shares pursuant to Article 9 below.
1.8 Closing Date means April 28, 1995.
1.9 COBRA means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
1.10 Code means the Internal Revenue Code of 1986, as amended.
1.11 Company is defined in the first recital.<PAGE>
<PAGE>
1.12 Contracts is defined in Section 3.21 below.
1.13 Corporate Records means the Certificate of Incorporation and
bylaws and all amendments thereto, stock ledgers, all minutes of the
proceedings of the Board of Directors and shareholders, corporate seals, and
all other documents relating to the organization and corporate maintenance of
a corporation.
1.14 DEI means DEKALB East, Inc., a Delaware corporation.
1.15 DEKALB License is defined in Section 5.12 below.
1.16 DGC Pension Plan is defined in Section 8.2 below.
1.17 DPEI means DEKALB Poultry Enterprises, Inc., a Delaware
corporation.
1.18 Elections is defined in Section 2.4 below.
1.19 Employment Agreements is defined in Section 5.9 below.
1.20 Employee Benefit Plans is defined in Section 3.27(a) below.
1.21 Employees is defined in Section 3.24 below.
1.22 ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
1.23 ERISA Affiliate means any entity that is a member of a "controlled
group of corporations" with, under "common control" with, or a member of an
"affiliated service group" with, the Company or the Subsidiaries, as defined
in Section 414(b), (c), (m) or (o) of the Code.
1.24 Facility Lease is defined in Section 5.11 below.
1.25 Financial Statements is defined in Section 3.9 below.
1.26 Fiscal Year shall mean the fiscal year of the Company, which
currently ends on August 31.
1.27 Fixed Assets is defined in Section 3.14 below.
1.28 Foreign Affiliates means PDG, RDG and Deejay-DEKALB Breeders
Private Limited, an Indian corporation.
1.29 GAAP means U.S. generally accepted accounting principles.
1.30 Gene Pool means the stock of purebred, hybrid and library lines of
poultry maintained by the Company, as described on Schedule 3.15 hereto.
1.31 Hazardous Materials Law means any federal, state, local or foreign
law, order, rule or regulation relating to pollution, worker safety, public
safety, human health, natural resources, the environment, or relating to the
discharge, remediation, removal, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances.
1.32 Hazardous Substance means any substance, material, chemical or
waste, the presence of which requires investigation or remediation under, or
which is, as of the Closing Date, regulated by, any Hazardous Materials Law.
1.33 Indemnified Parties is defined in Section 11.1(a) below.<PAGE>
<PAGE>
1.34 Indemnitor is defined in Section 11.1(a) below.
1.35 Insurance is defined in Section 3.18 below.
1.36 Intangible Personal Property is defined in 3.15 below.
1.37 Inventories is defined in Section 3.19 below.
1.38 Leases is defined in Section 3.12 below.
1.39 Liabilities is defined in Section 3.23 below.
1.40 Licenses is defined in Section 3.17 below.
1.41 Non-Competition Agreement is defined in Section 5.10 below.
1.42 PBGC is defined in Section 3.27(h) below.
1.43 PDG means Progenitoras DEKALB Gortie, S.A. de C.V., a Mexican
corporation.
1.44 Partnerships means DEKALB Ozark Hatchery, a Missouri general
partnership, and DEKALB East Hatcheries General Partnership, an Illinois
general partnership.
1.45 Pension Plans is defined in Section 3.27(b) below.
1.46 Premises means any real property and all improvements thereon
which are owned, operated or leased by the Company or the Subsidiaries.
1.47 Property is defined in Section 3.11 hereto.
1.48 Purchase Price means the amount stipulated in Section 2.2 below.
1.49 RDG means Reproductoras DEKALB Gortie, S.A. de C.V., a Mexican
corporation.
1.50 Schedules means all schedules to this Agreement.
1.51 Seller is defined in the introductory paragraph to this Agreement.
1.52 Services Agreement is defined in Section 5.13 below.
1.53 Share Certificates is defined in Section 7.1(h) below.
1.54 Shares is defined in Section 2.1 below.
1.55 SIP is defined in Section 8.3(a).
1.56 Subsidiaries means DPEI and DEI.
1.57 Subsidiary Shares is defined in Section 3.3 below.
1.58 Tax Returns and Statements is defined in Section 3.7 below.
1.59 Taxes means all federal, state, local, foreign and other tax
liabilities of any and all kinds arising out of Seller's ownership or
operation of the Company and any obligation of the Company or any consolidated
group of which the Company is or was a member with respect to any and all
taxes, including without limitation, income, profits, premiums, estimated,
excise, sales, use, gross receipts, franchise, transfer, withholding,
employment, unemployment compensation, payroll-related and property taxes,
import duties and other governmental charges, whether or not measured in whole
<PAGE>
<PAGE>
or in part by net income, and including deficiencies, interest, additions to
tax or interest and penalties with respect thereto, and including expenses
associated with contesting any proposed adjustment relating to the foregoing
and including any liability for the payment of any amounts described above as
a result of being a "Transferee" as defined in Section 6901 of the Code.
1.60 Welfare Plans is defined in Section 3.27(b) below.
ARTICLE 2
PURCHASE AND SALE OF THE SHARES
2.1 Purchase and Sale of the Shares. Upon the terms and subject to
the conditions set forth in this Agreement, Buyer agrees to purchase from
Seller, and Seller agrees to sell, assign, transfer, convey and deliver to
Buyer, at the Closing, one hundred percent (100%) of the then issued and
outstanding shares of capital stock (the "Shares") of the Company, in
consideration of Buyer's payment of the Purchase Price to Seller in accordance
with this Article 2.
2.2 The Purchase Price. The Purchase Price for the Shares shall be
Twelve Million Five Hundred Thousand Dollars ($12,500,000).
2.3 Payment. The Purchase Price shall be paid in U.S. Dollars by
Buyer to Seller by wire transfer of immediately available funds on the Closing
Date. The Purchase Price shall be remitted to Seller's account at The Chase
Manhattan Bank, N.A., New York, New York, ABA # 021 000021, Account no. 910-2-
595965.
2.4 Sales And Transfer Taxes. All applicable sales, transfer,
documentary, use, filing, recording or other taxes (other than taxes on or
measured by the net income of Seller) that may be due or payable as a result
of the sale of the Shares or any of the other transactions contemplated
hereunder (other than the divestment of assets described in Section 5.15
hereof, the transfer of real property described in Section 5.19 hereof, and
the transfer of trademarks described in Section 6.6 hereof) shall be borne by
Buyer, without regard to the party against which such taxes may be assessed.
Notwithstanding the foregoing, Buyer may elect, at its sole expense, to
contest the validity or amount of such taxes, provided, however, that, as a
condition to its election to contest such taxes, Buyer shall provide such
assurances and undertakings as may be necessary or appropriate to ensure that
neither Seller, nor any of its assets, becomes liable for or subject to any
penalty, fine, lien or other assessment as a result of such contest.
2.5 Tax Allocation. As additional consideration to Seller for Buyer's
purchase of the Shares, Seller shall be entitled to the benefit of any tax
refund or rebate, net of any Taxes payable by the Company and the Subsidiaries
and which relates to any tax return with respect to any period through the
Closing Date; provided, however, any such refund or rebate actually received
by Seller arising from a carryback of any tax benefit (attributable to
operations of the Company or the Subsidiaries after the Closing Date) to a
period before the Closing Date shall be paid to Buyer for its sole benefit.
Payments between the parties shall be made within thirty (30) days upon
presentation of proper documentation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and to
purchase the Shares, Seller makes the representations and warranties set forth
in this Article 3.<PAGE>
<PAGE>
3.1 Corporate Organization. Each of Seller, the Company and the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated.
Schedule 3.1 sets forth those jurisdictions in which each of the Company and
the Subsidiaries is qualified to do business as a foreign corporation. Each
of the Company and the Subsidiaries is qualified to do business as a foreign
corporation and is in good standing in each state or foreign country where the
nature of its business or its ownership of property requires it to be so
qualified. The failure of the Company or the Subsidiaries to be so qualified
in any jurisdiction, including, without limitation, the jurisdictions set
forth on Schedule 3.1 attached hereto, does not give rise to any material
adverse effect on the financial condition, business or operations of the
Company or the Subsidiaries. Each of Seller, the Company and the Subsidiaries
has all necessary corporate power and authority, including all necessary
licenses and permits, to carry on its business as it is now being conducted,
and to own or lease and operate its properties and assets. Complete, current
and correct copies of the Corporate Records of the Company and the
Subsidiaries have been delivered to Buyer prior to the date hereof, and no
changes have been made thereto since the date of delivery.
3.2 No Other Subsidiaries; Partnerships and Foreign Affiliates.
Except for the Foreign Affiliates set forth in Schedule 3.2, the Subsidiaries
and the Partnerships, the Company does not, directly or indirectly, own or
control any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, limited liability company, business
organization, trust or other entity. To the best of Seller's knowledge, the
Partnerships and the Foreign Affiliates have been operated in accordance with
the laws of their respective jurisdictions, and Seller has no knowledge of any
material claims or other liabilities arising from or relating to any of the
Partnerships or the Foreign Affiliates.
3.3 Capital Structure. The authorized capital stock of the Company
consists of 1,000 shares of voting common stock, $1 par value, all of which
are issued and outstanding. The authorized capital stock of each of the
Subsidiaries, the total number of issued and outstanding shares of voting
common stock and the number of shares of voting common stock issued to the
Company (the "Subsidiary Shares") is as set forth on Schedule 3.3 attached
hereto. All of the Shares and the Subsidiary Shares are equal in their
rights, preferences and privileges, were duly and validly issued in accordance
with applicable U.S. or, to Seller's best knowledge, foreign laws, and are
fully paid and non-assessable, with no statutory or other liability attaching
to the ownership thereof. There are no outstanding subscription rights,
options, warrants, convertible debt or securities, calls, agreements,
arrangements, commitments, understandings or other rights with respect to the
Shares, the Subsidiary Shares or the sale, transfer or issuance thereof.
3.4 Ownership of Shares. Seller is the owner, beneficially and of
record, of all of the Shares and has good, valid and marketable title to the
Shares, free and clear of any liens, encumbrances, security interests,
restrictions or claims whatsoever, with full power and authority to deliver
title to the Shares to Buyer in accordance with the terms of this Agreement.
The Company is the owner, beneficially and of record, of the Subsidiary Shares
and has good, valid and marketable title to the Subsidiary Shares, free and
clear of any liens, encumbrances, security interests, restrictions or claims
whatsoever. None of Seller or except as set forth on Schedule 3.4 attached
hereto, the Company or the Subsidiaries is a party to any voting trust
agreement or any other contract, agreement, arrangement, commitment, plan or
understanding restricting or otherwise relating to voting or dividend rights
or privileges with respect to the Shares or the Subsidiary Shares, or which
restricts the sale, transfer or assignment of the Shares or the Subsidiary
Shares.<PAGE>
<PAGE>
3.5 Power; Authorization and Approvals; Enforceability. Seller has
the corporate power to enter into this Agreement and each of the Acquisition
Agreements and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by Seller of this Agreement and each
of the Acquisition Agreements have been duly and validly authorized and
approved by all required corporate action of Seller. This Agreement and each
of the Acquisition Agreements are legal, valid and binding obligations of
Seller, enforceable in accordance with their respective terms, subject to
judicial discretion regarding specific performance or other equitable
remedies, and except as may be limited by bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or affecting the enforcement
of creditors' rights and remedies generally. No approvals or consents by, or
filing with, any court or governmental or administrative body or agency or any
other third party is required in connection with the execution and delivery by
Seller of this Agreement and the Acquisition Agreements or the consummation by
Seller of the transactions contemplated hereby and thereby.
3.6 No Violations. Neither the execution and delivery of this
Agreement and any of the Acquisition Agreements, nor the consummation of the
transactions contemplated hereby and thereby will:
(a) violate any provision of the Certificate of Incorporation or
the bylaws (or the equivalent constituent documents thereof)
of Seller, the Company or the Subsidiaries;
(b) violate, or be in conflict with, or constitute a default (or
an event which, with the giving of notice or lapse of time
or both, would constitute a default) under, or except as set
forth in Schedule 3.4 attached hereto, give rise to any
right of termination, cancellation or acceleration under any
of the terms, conditions or provisions of any agreement or
other document to which any of Seller, the Company or the
Subsidiaries is a party or by which any of Seller, the
Company or the Subsidiaries or any of their respective
properties or assets may be bound; or
(c) violate any order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority
applicable to any of Seller, the Company or the Subsidiaries
or any of their respective properties or assets.
3.7 Tax Returns. Except as described on Schedule 3.7 attached
hereto, neither the Company nor any of the Subsidiaries has been a member of
an Affiliated Group filing a consolidated federal income tax return, other
than a group of which the common parent is Seller. Seller has caused the
Company and the Subsidiaries to have:
(a) timely filed (or timely extended) all federal, state, local
and foreign franchise, income, sales, gross receipts and all
other tax returns and statements which are required to be
filed and which were due prior to the date hereof ("Tax
Returns and Statements"); and
(b) paid within the time (including extensions) and in the
manner prescribed by law or established reasonable reserves
as reflected on the Financial Statements for the payment of
all Taxes accrued or payable by the Company or the
Subsidiaries for all periods ending on or prior to the date
hereof.
The Tax Returns and Statements are complete and accurate in all material
respects, and no tax assessment or deficiency which has not been paid or for
which an adequate reserve has not been set aside, has been made or proposed
<PAGE>
<PAGE>
against the Company or the Subsidiaries, nor are any of the Tax Returns and
Statements now being or threatened to be examined or audited, and no consents
waiving or extending any applicable statute of limitations for the Tax Returns
and Statements, or any taxes required to be paid thereunder, have been filed.
Prior to the date hereof, Seller has caused the Company and DPEI to deliver to
Buyer complete, current and correct copies of the Tax Returns and Statements
for the Fiscal Years ended August 31, 1991 through 1993. Except as described
in Schedule 3.7, neither the Company nor any of the Subsidiaries: (i) has
assumed or is liable for any federal, state, local, foreign or other income
tax liability of any other person, including any predecessor corporation, as a
result of any purchase of assets or other business acquisition or combination
transaction (other than a merger in which the Company or such Subsidiary was
the surviving corporation or a consolidation) or (ii) has indemnified any
other person or otherwise agreed to pay on behalf of any other person tax
liability arising out of or which may be asserted on the basis of any tax
treatment adopted with respect to all or any aspect of such a business
acquisition transaction.
3.8 Transactions with Affiliates. Except as set forth on Schedule 3.8
attached hereto, neither Seller nor any of its Affiliates, has any interest,
directly or indirectly, in any agreement or other document to which the
Company or the Subsidiaries is a party, any interest in any properties or
assets of the Company or the Subsidiaries, or any interest in any competitor,
supplier or customer of the Company or the Subsidiaries. Except as set forth
on Schedule 3.8 attached hereto, neither the Company nor the Subsidiaries is
indebted, directly or indirectly, to Seller or its Affiliates, and neither
Seller nor its Affiliates is indebted, directly or indirectly, to the Company
or the Subsidiaries.
3.9 Financial Statements. Attached hereto as Schedule 3.9 are true
and complete copies of the unaudited consolidated financial statements of the
Company and the Subsidiaries as of and for the Fiscal Years ended August 31,
1992 through 1994 and the four months ended December 31, 1993 and 1994
(including, without limitation, the related balance sheets, statements of
operations and any notes, schedules and exhibits thereto), compiled by Seller
("Financial Statements"), and no changes have been made thereto. The
Financial Statements:
(a) present fairly and accurately the financial position of the
Company and the Subsidiaries as of the end of such periods
and the results of operations and changes in financial
position of the Company and the Subsidiaries for the periods
then ended;
(b) were prepared in accordance with GAAP consistently applied
and with determinations and computations in effect at that
time consistently applied, except as may be noted thereon;
and
(c) reflect that the Company and the Subsidiaries have set aside
adequate reserves for all taxes, federal, state, local,
foreign or otherwise, with respect to the period then ended
and all prior periods.
3.10 Title to Properties. Each of the Company and the Subsidiaries has
good, valid and marketable title to all of the properties and assets (personal
and mixed, tangible and intangible) which they respectively purport to own,
including, without limitation, all the properties and assets listed on
Schedules 3.11, 3.12, 3.14, 3.15, 3.16, 3.17, and 3.19 attached hereto. All
such properties and assets of the Company and the Subsidiaries are free and
clear of all title defects, liens, claims, charges, security interests or
other encumbrances of any kind or nature except for: <PAGE>
<PAGE>
(a) imperfections of title, which are set forth on Schedule 3.10
attached hereto, none of which materially detract from the
value, or impair the present use, of the property or assets
subject thereto or materially impair the operations of the
Company or the Subsidiaries; and
(b) liens for taxes and assessments not yet due.
3.11 Real Property. Schedule 3.11 attached hereto contains a complete,
current and correct list of all real property owned by the Company or the
Subsidiaries (collectively, the "Property"). Except as set forth on Schedule
3.11, Seller has received no notices from any governmental authority
pertaining to, and Seller is not aware of, any violations of law or
governmental regulations or ordinances with respect to the Property and except
as set forth in Schedule 3.10 attached hereto, there are no mortgages, liens,
encumbrances, covenants, conditions, reservations, restrictions, easements,
contracts or agreements affecting the Property. There are no claims or leases
in favor of any person or entity which are or could become a lien on the
Property arising on account of the furnishing of labor and/or materials to the
Property. Except as listed on Schedule 3.11, the Property, including
without limitation, the roofs, exterior walls and the HVAC, plumbing,
mechanical and electrical systems, are functional, adequate for the present
uses to which they are being put and have no defects which would, in the short
term after the Closing Date, require replacement or significant repairs,
except for ordinary, routine maintenance and repairs which are not material in
cost. None of Seller, the Company or the Subsidiaries has filed or delivered
any claims, notices or demands of any kind with any insurance company,
contractor or subcontractor with respect to any defects or inadequacies in the
condition of the Property which remain outstanding.
3.12 Leases. Schedule 3.12 attached hereto contains a complete,
current and correct list of all leases pursuant to which the Company or the
Subsidiaries lease real or personal property ("Leases"). Prior to the date
hereof, Seller has delivered to Buyer, or has caused the Company to deliver to
Buyer, complete, current and correct copies of the Leases, and no changes have
been made thereto since the date of delivery. Each of the Leases is valid,
binding and enforceable in accordance with its terms, there are no existing
material defaults by the Company or the Subsidiaries thereunder and no event
has occurred which would constitute a default (or any event which, with the
giving of notice or lapse of time or both, would constitute a default)
thereunder by the Company or the Subsidiaries.
3.13 Zoning. To Seller's best knowledge, the Company and the
Subsidiaries presently are in substantial compliance with all laws, statutes,
ordinances, rules, regulations and orders relating to zoning and land use
restrictions which are applicable to any portion of the Property; provided
that to the extent the Company is not in substantial compliance with such
laws, statutes, ordinances, rules, regulations and orders, the violation
thereof or failure to comply therewith would not subject the Company or the
Subsidiaries to any material penalty, cost or other expense.
3.14 Fixed Assets. Schedule 3.14 attached hereto contains a complete,
current and correct list of all plants, buildings, fixtures, structures,
furniture and equipment owned, leased or used by the Company or the
Subsidiaries ("Fixed Assets"). Except as set forth on Schedule 3.14, the
Fixed Assets are functional, adequate for the present uses to which they are
being put and have no defects which would, in the short term after the Closing
Date, require replacement or significant repair, except for ordinary, routine
maintenance and repairs which are not material in cost.
3.15 Intangible Personal Property. Schedule 3.15 attached hereto
contains a complete, current and correct list of the Gene Pool, each domestic
and foreign patent, patent application, invention disclosure, trademark,<PAGE>
<PAGE>
trademark registration, trade name, service mark and application for any of
the foregoing, and any other trade secrets and proprietary know-how owned or
used by the Company or the Subsidiaries in the conduct of their respective
businesses ("Intangible Personal Property"). Except as set forth on Schedule
3.15, the Company and the Subsidiaries have the right and authority to use the
Intangible Personal Property in connection with the conduct of their
respective businesses in the manner presently conducted, and such use does not
conflict with, infringe upon or violate any trademark, trade name, copyright,
patent or patent rights, trade secret rights or any other intellectual
property rights of any other person or entity. There have not been any
actions or other judicial or adversary proceedings involving Seller, the
Company or any of the Subsidiaries concerning the ownership, use,
infringement, validity of the Intangible Personal Property, nor, to Seller's
best knowledge, have any such actions or proceedings been threatened.
3.16 Accounts Receivable. Schedule 3.16 attached hereto contains a
complete, current and correct list of all accounts receivable of the Company
and the Subsidiaries as of December 31, 1994 ("Accounts Receivable"), and
sets forth the aging of such Accounts Receivable. The Accounts Receivable
represent sales actually made or services actually performed on or prior to
such date in the ordinary course of business of the Company and the
Subsidiaries and consistent with past practices. Except as set forth on
Schedule 3.16, there is no contest, claim or right of set-off contained in any
oral or written agreement with any account debtor relating to the amount or
validity of any Accounts Receivable, or any other accounts receivable created
after December 31, 1994 . The Accounts Receivable (net of any allowance for
doubtful accounts set up consistently with the past practices of the Company
and the Subsidiaries and reflected in the Financial Statements) are valid.
3.17 Licenses and Permits. The Company and the Subsidiaries possess
all licenses, permits, franchises, rights and privileges necessary for the
present conduct of their respective businesses ("Licenses"), including,
without limitation, any and all Licenses issued by any governmental or
administrative agency or body, other than those Licenses, if any, where the
failure of the Company or the Subsidiaries to obtain or maintain such Licenses
does not give rise to any material adverse effect on the business or
operations of the Company or the Subsidiaries. Each of the Licenses is in
full force and effect, and there are no pending or threatened claims or
proceedings challenging the validity of or seeking to revoke or discontinue,
any of the Licenses. None of the transactions contemplated by this Agreement
nor any of the Company's or the Subsidiaries' prior operations or history
shall affect the validity of or cause the revocation or discontinuation of any
of the Licenses.
3.18 Insurance. Schedule 3.18 attached hereto contains a complete,
current and correct description of all existing policies of fire, liability,
worker's compensation and all other forms of insurance maintained by, or
otherwise applicable to, the Company and the Subsidiaries. All such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date hereof have been paid, and no notice of
cancellation, termination or denial of coverage has been received with respect
to any such policy. Such policies:
(a) are, to the best knowledge of Seller, adequate for
compliance with all requirements of law and of all
agreements or instruments to which the Company or any of the
Subsidiaries is a party, or pursuant to which any of their
respective properties or assets may be subject;
(b) are, to the best knowledge of Seller, adequate for
conducting the business of the Company and the Subsidiaries
as presently conducted in the ordinary course; <PAGE>
<PAGE>
(c) are valid, outstanding and enforceable policies;
(d) to the best knowledge of Seller, provide adequate insurance
coverage for the properties, assets and operations of the
Company and the Subsidiaries as presently conducted; and
(e) will remain in full force and effect, without the payment of
additional premiums, through the Closing Date, and will
terminate as to the Company and the Subsidiaries effective
as of the Closing Date.
Schedule 3.18 attached hereto also describes all claims of the Company or the
Subsidiaries which are pending under such insurance policies or have been paid
to the Company since January 1, 1993. Since January 1, 1993, neither the
Company nor any of the Subsidiaries has been refused any insurance with
respect to their respective properties, assets or operations, nor has any of
their respective coverage been limited by any insurance carrier to which any
of them has applied for any such insurance or with which any of them has
carried insurance. Prior to the date hereof, Seller has caused the Company
and the Subsidiaries to deliver to Buyer complete, current and correct copies
of all of the policies of insurance which are maintained by or for the Company
and the Subsidiaries.
3.19 Inventories. Schedule 3.19 attached hereto contains a complete,
current and correct list of all inventories of the Company and the
Subsidiaries as of December 31, 1994 ("Inventories"). The Inventories are of
a quality and quantity usable and salable in the ordinary course of business
of the Company and the Subsidiaries, except for obsolete items and items of
below standard quality, all of which, in the aggregate, are immaterial in
amount. Items included in the Inventories are carried on the books of the
Company and the Subsidiaries and are valued on the Financial Statements at the
lower of cost or market.
3.20 Absence of Certain Changes. Except as set forth on Schedule 3.20,
since December 31, 1994, there has not been:
(a) Any declaration or payment of dividends by the Company or
the Subsidiaries or any transfer of properties or assets of any kind
whatsoever by the Company or any of the Subsidiaries to Seller or any
issuance, sale, repurchase or redemption by the Company or any of the
Subsidiaries of any shares of their respective capital stock of any class or
of any other of their respective securities;
(b) Any capital expenditure by or any transaction of the Company
or the Subsidiaries not in the ordinary course of business;
(c) Any material adverse change in the results of operations,
financial condition, or business of the Company or the Subsidiaries (other
than changes in the general economic conditions that affect the world or
national economy or the poultry industry generally; provided, however, that
such changes in general economic conditions or in the poultry industry
generally shall not be deemed to excuse any losses of the Company's customers
or any decline in the Company's sales revenues that are materially in excess
of the declines reflected in the poultry industry generally for the relevant
period);
(d) Any damage, destruction or loss, whether or not covered by
insurance, which has had or may have a material adverse effect on any of the
properties, assets, business or prospects of the Company or the Subsidiaries;
(e) Except in the ordinary course of business and consistent
with past practices, any sale or transfer of any properties or assets or any
cancellation of any debts or claims of the Company or the Subsidiaries;<PAGE>
<PAGE>
(f) Any mortgage, pledge, lien, charge or encumbrance of any
kind on any of the Company's or the Subsidiaries' properties or assets, or any
occurrence of, assumption of, or taking of any properties or assets subject to
any material liability;
(g) Any amendment, modification or termination of any material
contract or agreement to which the Company or the Subsidiaries are a party or
pursuant to which any of their respective properties or assets may be bound;
(h) Any increase in, or commitment to increase, the compensation
payable or to become payable to any officer or director of the Company or the
Subsidiaries, or any of the Employees, or any commitment to make severance,
bonus or special payments to any of such parties upon a change in ownership or
management of the Company or the Subsidiaries or upon termination of such
parties where any such amount would become the obligation of Buyer, the
Company or the Subsidiaries;
(i) Any adoption by the Company or the Subsidiaries of a plan or
agreement or amendment to any plan or agreement providing any new or
additional employee benefits, except to the extent any such plan or agreement
or amendment to any plan or agreement is adopted with the written consent of
Buyer;
(j) Any material alteration in the manner of keeping the books,
accounts or records of the Company or the Subsidiaries or in the manner of
preparing the Financial Statements, or in the accounting practices of the
Company or any of the Subsidiaries;
(k) Any material alteration in the operating policies and
procedures of the Company or the Subsidiaries;
(l) Any waiver or release of any right or claim of the Company
or any of the Subsidiaries except in the ordinary course of business;
(m) Any agreement by the Company or any of the Subsidiaries to
do any of the items described in the preceding sub-clauses (a) through (l); or
(n) To the best knowledge of Seller, the occurrence of any other
event or the development of any other condition which has had or is reasonably
likely to have a material adverse effect on the results of operations,
financial condition, or business of the Company or the Subsidiaries (other
than changes in the general economic conditions that affect the world or
national economy or the poultry industry generally; provided, however, that
such changes in general economic conditions or in the poultry industry
generally shall not be deemed to excuse any losses of the Company's customers
or any decline in the Company's sales revenues that are materially in excess
of the declines reflected in the poultry industry generally for the relevant
period);
3.21 Contracts; Compliance with Contracts. Schedule 3.21 attached
hereto contains a complete, current and correct list of all material
contracts, commitments, obligations or agreements of the Company and the
Subsidiaries, whether written or oral ("Contracts"). No event has occurred
which would constitute a default (or any event which, with the giving of
notice or lapse of time or both, would constitute a default) under any term or
provision of any of the Contracts. Each of the Contracts is in full force and
effect and is the legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms. Except as may be set forth in the
Contracts listed on Schedule 3.21, neither the Company nor any of the
Subsidiaries is a party to any Contract that restricts the Company or the
Subsidiaries from carrying on their respective businesses or any part thereof,
or from competing in any line of business with any person, corporation or
entity. Prior to the date hereof, Seller has caused the Company and the<PAGE>
<PAGE>
Subsidiaries to deliver to Buyer a complete, current and correct copy of each
of the written Contracts, as well as a written summary of each of the oral
Contracts, including all amendments and modifications thereto.
3.22 Compliance with Laws. Except as set forth in Schedule 3.26, the
business of the Company and the Subsidiaries has been conducted in compliance
with all applicable laws, statutes, ordinances, rules, regulations, orders and
other requirements of all governmental authorities and agencies having
jurisdiction over the Company and the Subsidiaries, including, without
limitation, all such laws, regulations, ordinances and requirements relating
to environmental, antitrust, consumer protection, labor and employment, zoning
and land use, immigration, health, occupational safety, pension and securities
matters, except for violations that individually, or in the aggregate, will
have no material adverse effect on the business, operations or financial
condition of the Company and the Subsidiaries. None of the Company, the
Seller or any of the Subsidiaries has received any notification of any
asserted present or past failure by the Company or the Subsidiaries to comply
with such laws, statutes, ordinances, rules, regulations, orders or other
requirements.
3.23 No Undisclosed Liabilities. Schedule 3.23 attached hereto
contains a complete, current and correct list of all contractual or non-
contractual obligations, debts or liabilities of any nature of the Company or
the Subsidiaries, whether accrued or unaccrued, contingent or absolute, direct
or indirect, recorded or unrecorded, potential or realized which are not
reflected on the Financial Statements ("Liabilities") as of December 31, 1994.
Neither the Company nor the Subsidiaries has incurred any Liabilities since
December 31, 1994, except for those Liabilities incurred in the ordinary
course of business and consistent with past practice and which, in any event,
would not, in the aggregate, have a material adverse effect upon the business,
operations or financial condition of the Company and the Subsidiaries.
3.24 Employees. Schedule 3.24 attached hereto contains a complete,
current and correct list of all employees of the Company and the Subsidiaries
("Employees"), which includes the job position, base salary and target bonus
of each of the Employees. Except to the extent set forth in Schedule 3.24
attached hereto:
(a) The Company and the Subsidiaries are in compliance with all
laws, statutes, ordinances, rules, regulations, orders and other requirements
relating to the employment of labor, including, without limitation, Title VII
of the Federal Civil Rights Act of 1964, the Federal Age Discrimination in
Employment Act of 1967, ERISA, the Federal Americans with Disabilities Act,
the Fair Labor Standards Act or the Illinois Human Rights Act and any and all
provisions thereof relating to wages, hours, collective bargaining and the
payment of social security and similar taxes.
(b) There is no pending or threatened charge, complaint,
allegation, application or other process or claim pending or threatened
against the Company or the Subsidiaries before any governmental or
administrative agency or other entity; and
(c) None of the Company, any of the Subsidiaries or any of the
Employees is a party or subject to any collective bargaining agreement and
there is no labor dispute, strike, slowdown, work stoppage, union organizing
campaign or other job action pending, threatened against or otherwise
affecting the Company or the Subsidiaries.
<PAGE>
<PAGE>
3.25 Litigation. Except as set forth in Schedule 3.25 attached hereto:
(a) There is no pending or, to the best knowledge of Seller,
threatened action, suit, arbitration proceeding, investigation or inquiry
before any court or governmental or administrative body or agency, or any
private arbitration tribunal, against, relating to or affecting any of Seller,
the Company, the Subsidiaries, or any director, officer, agent or Employee of
the Company or the Subsidiaries in his or her or its capacity as such, or the
assets, properties or business of the Company or the Subsidiaries, or the
transactions contemplated by this Agreement, nor are Seller, the Company or
the Subsidiaries aware of any facts or circumstances which could reasonably
lead to or provide the basis for any such threatened action, suit, arbitration
proceeding, investigation or inquiry;
(b) There is not in effect any order, judgment or decree of any
court or governmental or administrative body or agency enjoining or otherwise
limiting any of Seller, the Company, the Subsidiaries, or any officer,
director, Employee or agent of the Company or the Subsidiaries from conducting
or engaging in any aspect of the Company's or the Subsidiaries' business, or
requiring Seller, the Company, any of the Subsidiaries, or any officer,
director, Employee or agent of the Company or any of the Subsidiaries to take
certain action which could reasonably be anticipated to have a material
adverse effect on the business, operations or financial condition of the
Company or any of the Subsidiaries; and
(c) Neither the Company nor any of the Subsidiaries is in
violation of or in default under any order, judgment, writ, injunction or
decree of any court or governmental or administrative body or agency.
3.26 Environmental Compliance. Except as disclosed in Schedule 3.26
attached hereto:
(a) The Company and the Subsidiaries have obtained, and are in
full compliance with, all permits, registrations, Licenses or other
authorizations which are required under any Hazardous Materials Laws for the
business and operations of the Company and the Subsidiaries;
(b) Seller, the Company and the Subsidiaries are not aware of
any past or present events, settlements, consent decrees, conditions,
practices or incidents which may adversely impact, interfere with or prevent
the Company's and the Subsidiaries' continued compliance with, Hazardous
Materials Laws.
(c) Neither Seller, the Company nor the Subsidiaries have
discovered or caused, and to the best knowledge of Seller, no other person has
discovered or caused, any discharge, emission, disposal or release of
Hazardous Substances on the Premises, or any occurrence or condition on the
Premises or in the vicinity of the Premises, which could make the Premises
subject to restrictions on the ownership, occupancy, transferability or use
under any Hazardous Materials Laws;
(d) Neither Seller, the Company nor the Subsidiaries have
manufactured, stored or disposed of Hazardous Substances at any location which
was not in compliance with Hazardous Materials Laws;
(e) No underground storage tanks or surface impoundments are
now, or to the best knowledge of Seller, ever have been, located on the
Premises; and
(f) No lien in favor of any governmental authority for liability
under or resulting from Hazardous Materials Laws, or damages arising from, or
costs incurred by such governmental authority in response to, a release of
Hazardous Substances, has ever been filed against the Premises.<PAGE>
<PAGE>
3.27 Employee Benefit Plans.
(a) Except for the plans, agreements, arrangements and practices
set forth in Schedule 3.27 hereto (collectively, the "Employee Benefit
Plans"), neither the Company nor any other ERISA Affiliate maintains or
contributes to, or is obligated or required to contribute to, any bonus,
deferred compensation, severance or termination pay, pension, profit sharing,
stock purchase, stock grant, stock option, group life insurance, health care,
hospitalization insurance, disability, retirement or any other employee
benefit or fringe benefit plan, agreement, arrangement or practice, whether
formal or informal and whether legally binding or not, which covers the
Employees. Neither the Company nor any ERISA Affiliate has any commitment,
whether formal or informal and whether legally binding or not, to create or
contribute to any such additional plan.
(b) Each Employee Benefit Plan, including each Employee Benefit
Plan which is an "employee pension benefit plan," as such term is defined in
Section 3(2) of ERISA (the "Pension Plans"), or an "employee welfare benefit
plan," as such term is defined in Section 3(1) of ERISA (the "Welfare Plans"),
in all material respects conforms to, and is and has been operated in
substantial compliance with, applicable law, including, but not limited to,
ERISA and the Code.
(c) Neither the Company nor any ERISA Affiliate, nor any of the
Pension Plans, nor any of the Welfare Plans nor any trust created thereunder,
nor any trustee or administrator thereof, has engaged in a prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975 of
the Code) which might subject the Company or any Subsidiary to any material
liability or civil penalty assessed pursuant to Section 502(i) of ERISA or a
tax imposed by Section 4975 of the Code.
(d) There are no funding deficiencies or funding waivers (within
the meaning of Section 412 of the Code), and full payment, or appropriate
accruals in accordance with GAAP, have been duly made of all amounts that the
Company, or any ERISA Affiliate is required under the terms of all Employee
Benefit Plans to pay as contributions to such Employee Benefit Plans, with
respect to the Employees covered by such Plans, on or prior to December 31,
1994.
(e) None of the Pension Plans is a "Multiemployer Plan," as such
term is defined in Section 3(37) of ERISA.
(f) Neither the Company, any ERISA Affiliate nor any
administrator nor fiduciary of any Pension Plan or Welfare Plan has engaged in
any transaction or acted or failed to act in a manner which could subject the
Company or any Subsidiary to any material liability for a breach of fiduciary
duty under ERISA or any other applicable law.
(g) Except under the Employee Benefit Plans described in
Schedule 3.27, neither the Company, any Subsidiary nor any Employee Benefit
Plan is obligated to make payment of postretirement life, accidental death,
medical or disability insurance benefits of any type, excluding for this
purpose the provision of any such benefits as a result of an individual's
exercise of his or her conversion rights under COBRA to, or with respect to,
any former employee of the Company or any Subsidiary.
(h) With respect to any pension plan, as such term is defined in
Section 3(2) of ERISA, covering employees and former employees of the Company
or any ERISA Affiliate, all premiums (and interest charges and penalties for
late payment, if applicable) due the Pension Benefit Guaranty Corporation
("PBGC") on or before the Closing Date have been paid. There has been no
"reportable event", as defined in Section 4043(b) of ERISA and the PBGC
regulations under that Section as to which notice would be required to be<PAGE>
<PAGE>
filed with the PBGC. No liability to the PBGC has been incurred by the
Company or any ERISA Affiliate on account of the termination of any such
pension plan and the PBGC has not instituted proceedings to terminate any such
pension plan and, to the best knowledge of Seller, there exists no basis for
such a proceeding.
(i) True and complete copies of each of the following documents
have been delivered to Buyer: (i) each Welfare Plan and each Pension Plan,
related trust agreements, annuity contracts, or other funding instruments;
(ii) each Employee Benefit Plan and complete descriptions of any such plans
that are not in writing; (iii) the most recent determination letter issued by
the Internal Revenue Service with respect to each Pension Plan; (iv) Annual
Reports on Form 5500 Series required to be filed with any governmental agency
for each Welfare Plan and each Pension Plan for the two most recent plan
years; and (v) actuarial reports, consisting of the Schedule B and attachments
to the Form 5500 Series, prepared by the last two plan years for each Pension
Plan.
3.28 Brokers and Finders. Except for accountants and attorneys acting
as such (and not as brokers, finders or in other like capacity), all
negotiations on behalf of Seller relating to this Agreement and the
transactions contemplated hereby have been carried on directly by Seller with
Buyer without the intervention of any broker, finder, investment banker or
other third party representing Seller. Seller has not engaged or authorized
any broker, finder, investment banker or other third party to act on behalf of
Seller, directly or indirectly, as a broker, finder, investment broker or in
any other like capacity in connection with this Agreement or the transactions
contemplated hereby, or has consented to or acquiesced in anyone so acting,
and Seller knows of no claim for compensation from any such broker, finder,
investment banker or other third party for so acting or of any basis for such
a claim.
3.29 Accuracy of Representations and Warranties. No representation or
warranty made in this Agreement by or on behalf of Seller to Buyer, with
respect to the Company, Seller, any of the Subsidiaries, the Shares, the
Subsidiary Shares or the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements so made, in light of the circumstances under
which they are made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement and to
sell the Shares, Buyer makes the representations and warranties set forth in
this Article 4.
4.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware.
4.2 Power; Authorization and Approvals; Enforceability. Buyer has the
corporate power to enter into this Agreement and each of the Acquisition
Agreements and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by Buyer of this Agreement and each of
the Acquisition Agreements have been duly and validly authorized and approved
by all required corporate action of Buyer. This Agreement and each of the
Acquisition Agreements are legal, valid and binding obligations of Buyer,
enforceable in accordance with their respective terms, subject to judicial
discretion regarding specific performance or other equitable remedies, and
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
or other laws relating to or affecting the enforcement of creditors' rights
and remedies generally. No approvals or consents by, or filing with, any<PAGE>
<PAGE>
court or governmental or administrative body or agency or any other third
party is required in connection with the execution and delivery by Buyer of
this Agreement or any of the Acquisition Agreements, or the consummation by
Buyer of the transactions contemplated hereby and thereby.
4.3 No Violations. Neither the execution and delivery of this
Agreement and any of the Acquisition Agreements, nor the consummation of the
transactions contemplated hereby and thereby, will:
(a) violate any provision of the Articles of Incorporation or
the Bylaws of Buyer;
(b) violate, or be in conflict with, or constitute a default (or
any event which, with the giving of notice or lapse of time
or both, would constitute a default) under any material
agreement or instrument to which Buyer is a party or by
which Buyer is bound; or
(c) violate any order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority
applicable to Buyer.
4.4 Investment Intent. Buyer is purchasing the Shares for investment
purposes only and not with a view to distribution of the Shares.
4.5 Brokers and Finders. Except for accountants and attorneys acting
as such (and not as brokers, finders or in other like capacity), all
negotiations on behalf of Buyer relating to this Agreement and the
transactions contemplated hereby have been carried on directly by Buyer with
Seller without the intervention of any broker, finder, investment banker or
other third party representing Buyer. Buyer has not engaged or authorized any
broker, finder, investment banker or other third party to act on behalf of
Buyer, directly or indirectly, as a broker, finder, investment banker or in
any other like capacity in connection with this Agreement or the transactions
contemplated hereby, or has consented to or acquiesced in anyone so acting,
and Buyer knows of no claim for compensation from any such broker, finder,
investment banker or other third party for so acting or of any basis for such
a claim.
4.6 Accuracy of Representations and Warranties. No representation or
warranty made in this Agreement by or on behalf of Buyer to Seller, with
respect to Buyer and the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements so made, in light of the circumstances under
which they are made, not misleading.
ARTICLE 5
COVENANTS OF SELLER
5.1 Conduct of Business - Negative Covenants. Prior to the Closing
Date, Seller shall not sell, transfer, pledge, encumber or otherwise dispose
of any of the Shares. In addition, prior to the Closing Date, Seller shall
not instruct or permit the Company or the Subsidiaries to, without the prior
written consent of Buyer, conduct their respective businesses other than in
the ordinary course of business and consistent with past practices. Without
limiting the generality of the foregoing, prior to the Closing Date, Seller
shall not permit the Company or the Subsidiaries, without the prior written
consent of Buyer, to:
(a) Offer, issue or sell or cause to be offered, issued or sold
any shares, options, warrants, subscriptions or other rights to purchase
Shares or any other capital stock of the Company or the Subsidiaries or<PAGE>
<PAGE>
securities or evidences of indebtedness convertible into Shares or any other
capital stock of the Company or the Subsidiaries;
(b) Split, reclassify, or change the rights and privileges of,
or redeem, repurchase or otherwise acquire any of the Shares;
(c) Settle any lawsuit or any other claim for over Twenty-Five
Thousand Dollars ($25,000) asserted against the Company, the Subsidiaries or
any of their respective officers, directors, shareholders, Employees,
representatives or agents;
(d) Other than in the ordinary course of business and consistent
with past practices, prepay any indebtedness, or pledge or subject to any
lien, charge, security interest or otherwise encumber any properties or assets
of the Company or the Subsidiaries;
(e) Other than in the ordinary course of business and consistent
with past practices, declare or pay any bonuses or any increases in salary,
commissions or other compensation to any of the Employees, independent
contractors or agents of the Company or the Subsidiaries, or amend any
existing, or enter into any new, employment, engagement or consulting
contracts;
(f) Amend the Certificate of Incorporation or the Bylaws of the
Company;
(g) Violate any law, statute, ordinance, rule, regulation, order
or other requirement applicable to the conduct of business of the Company or
the Subsidiaries, or relinquish, suffer, terminate or agree to the suspension
of any rights, or (except where the same are not required) the termination or
suspension of any of the Licenses;
(h) Other than in the ordinary course of business and consistent
with past practices and except for the divestment of certain assets pursuant
to Section 5.15 hereof, sell or in any other manner transfer or otherwise
dispose of any properties or assets of the Company or the Subsidiaries to any
of Seller or its Affiliates, or cause or permit the Company or the
Subsidiaries to purchase or in any other manner acquire for consideration any
properties or assets of any of Seller or its Affiliates, or enter into any
other agreement of any kind with any of Seller or its Affiliates;
(i) Declare or pay any dividend on or make any distribution with
respect to the Shares or any other shares of capital stock of the Company or
the Subsidiaries;
(j) Sell, assign or otherwise transfer any of the properties or
assets of the Company or the Subsidiaries, including, without limitation, any
Property, Fixed Assets or Intangible Personal Property, except for sales of
Inventories in the ordinary course of business and consistent with past
practices;
(k) Other than in the ordinary course of business and consistent
with past practices, borrow any funds or incur any other Liabilities
(contingent or otherwise) or guarantee any loans or any other obligations of
others or indemnify others;
(l) Purchase or lease any interest in real property;
(m) Enter into any employment agreements or adopt any employee
benefit plan or arrangement of any type that would add to employee benefit
costs of the Company or the Subsidiaries, or terminate any Employee Benefit
Plan or take any action with respect to the terms of such Employee Benefit
Plans which would adversely affect the accrued benefits of the Employees;<PAGE>
<PAGE>
(n) Consent to the extension of the statute of limitations
applicable to the examination of the Company's or the Subsidiaries' tax
returns;
(o) Other than in the ordinary course of business and consistent
with past practices, enter into any contracts or commitments for the purchase
of materials, supplies or equipment for amounts in excess of One Hundred
Thousand Dollars ($100,000) in the aggregate;
(p) Take any action or omit to take any action that would result
in a cancellation or breach of, or with notice or lapse of time or both would
constitute a default under, any Contract to which the Company or the
Subsidiaries are a party or by which any of them or their respective assets
may be bound;
(q) Merge or consolidate with, or purchase all or substantially
all of the shares of capital stock (or other equity securities) or assets of,
any corporation, partnership, association or any other business organization;
(r) Become a general or limited partner of any partnership;
(s) Adopt or implement any material change in the operating
policies or procedures of the Company or the Subsidiaries;
(t) Take any action or omit to take any action that would cause
any representation made by Seller under Article 3 above to be made untrue, or
would result in the breach of any warranty made by Seller under Article 3
above.
(u) Change or alter the manner of keeping the books, accounts or
records of the Company or the Subsidiaries, or in the accounting practices of
the Company or the Subsidiaries.
(v) Take any actions which are reasonably likely to have a
material adverse effect on the results of operations, financial condition,
business or prospects of the Company or the Subsidiaries.
(w) Commit the Company or the Subsidiaries to do any of the
things described in this Section 5.1.
5.2 Conduct of Business - Affirmative Covenants. Prior to the Closing
Date, Seller will cause the Company and the Subsidiaries to take any and all
actions which may be necessary to conduct the business and operations of the
Company and the Subsidiaries in the ordinary course of business and consistent
with past practices, including, without limitation, actions to:
(a) Maintain their respective good standing and qualification to
do business in all jurisdictions where required to be qualified to do
business;
(b) Maintain all the Licenses which are necessary for the
conduct of the Company's and the Subsidiaries' business and operations;
(c) Continue to maintain their respective properties, assets and
equipment in customary repair, order and working condition, reasonable wear
and use excepted;
(d) Duly comply with all laws, statutes, rules and regulations
which are applicable to the Company, the Subsidiaries or their respective
properties or assets;<PAGE>
<PAGE>
(e) Duly comply with the terms, conditions or provisions of all
Contracts to which the Company, the Subsidiaries or their respective
properties or assets may be bound;
(f) Maintain in force and effect the current insurance with
respect to the conduct of the Company's and the Subsidiaries' business and
operations and their respective properties, assets and equipment;
(g) Pay and discharge, before the same shall become delinquent,
all taxes, assessments and governmental charges imposed on or against the
income or profits or any of the properties, assets or equipment of the Company
or the Subsidiaries;
(h) Pay all costs and expenses of the Company and the
Subsidiaries as they become due and payable in the ordinary course of business
and consistent with past practices;
(i) Timely pay all amounts required to be paid by the Company or
the Subsidiaries under any and all Employee Plans;
(j) Timely file or extend tax returns and statements which are
required to be filed by the Company or the Subsidiaries;
(k) Use commercially reasonable efforts to keep intact the
present business organization of the Company and the Subsidiaries, including
the services of their respective present officers, directors, Employees,
representatives and agents;
(l) Use commercially reasonable efforts to preserve the present
relationships of the Company and the Subsidiaries with all customers, clients,
accounts, distributors, sales representatives, suppliers and other entities or
persons having business relationships with the Company and the Subsidiaries;
(m) Maintain the books, records and accounts of the Company and
the Subsidiaries with completeness and accuracy in the ordinary course of
business and consistent with past practices;
(n) Timely file or cause to be timely filed any and all
applicable reports, statements or filings with all court or governmental or
administrative bodies or agencies; and
(o) Promptly furnish to Buyer a copy of any notice to Seller received
by Seller prior to the Closing Date from any governmental authority of any
violation at the Property of any rule, regulation or ordinance applicable to
the Property or of any condemnation action against the Property.
5.3 Access to Information and Personnel. At reasonable times before
the Closing Date, Seller shall cause the Company and the Subsidiaries to
permit Buyer, through its representatives and agents, during normal business
hours, to speak with, interview and discuss the business and operations of the
Company and the Subsidiaries with the directors, officers, Employees,
attorneys and agents of the Company and the Subsidiaries, and to visit the
premises of the Company and the Subsidiaries to examine any and all records,
books, Contracts, commitments, shareholder lists, files, working papers,
computer data and programs and software, and drafts pertaining to the business
and operations of the Company and the Subsidiaries and the ownership of their
respective properties and assets, and to undertake such other steps as Buyer
considers appropriate to familiarize Buyer with the Company, the Subsidiaries
and their respective businesses. Seller shall, and shall cause the Company
and the Employees to, fully cooperate with Buyer with respect to the
foregoing, and to furnish any and all financial, technical and operating data
and other information pertaining to the business of the Company and the
Subsidiaries as Buyer may reasonably request from time to time.<PAGE>
<PAGE>
5.4 Disclosure of Sale. Prior to the Closing Date, and except as may
be required to comply with the requirements of applicable United States
securities laws after written notice to Buyer, neither Seller nor its
Affiliates shall make any statement to the press, press release or other
public announcement regarding this Agreement or the transactions contemplated
hereby, unless the text and timing of the release of any such statement have
been approved by Buyer in writing. Buyer has, through its attorneys, approved
in writing the text of the press release attached hereto as Schedule 5.4.
5.5 Confidentiality. Neither Seller nor its Affiliates shall, without
the prior written consent of Buyer, disclose or acquiesce in the disclosure by
any person or entity, or use or enable a third party to use to the competitive
detriment of Buyer, any non-public information regarding Buyer or its business
or financial condition, contained in any documents or otherwise furnished at
any time to Seller by or on behalf of Buyer to any person or organization
except Seller's legal counsel, accountants, financial advisors, investment
bankers and its other authorized agents and representatives, and to such
persons only to the extent required for activities directly related to the
sale of the Shares or other transactions contemplated by this Agreement,
except to the extent such information has been publicly disclosed or is
otherwise in the public domain or is required to be disclosed by law or by a
court of competent jurisdiction.
5.6 Best Efforts. Seller shall use its best efforts to cause the
transactions contemplated hereby to be consummated on or before April 28,
1995 and to take or to cause the Company and the Subsidiaries to take any and
all actions which may be required to be taken under this Agreement prior to
the Closing Date. Seller shall proceed as soon as practicable in the
procurement of all permits, consents and approvals and in the taking of any
other action, and the satisfaction of all other requirements prescribed by law
or otherwise necessary for consummation of the transactions contemplated
hereby on the terms herein provided, and shall diligently prosecute the same.
5.7 Supplements to Schedules. Subject to Buyer's rights under
Section 7.1(b) hereof, from time to time prior to the Closing Date, Seller
will promptly supplement or amend the Schedules attached hereto with respect
to any material matter hereafter arising which, if existing or occurring at
the date hereto, would have been required to be set forth or described on the
Schedules.
5.8 Resignations of Directors. On or prior to the Closing Date, all
of the members of the Board of Directors and each of the officers of the
Company and of the Subsidiaries (except Dr. Gary Waters, Dr. Larry Vint, Mr.
William Bradley and Mr. Alan Koepcke) elected prior to the Closing Date shall
have submitted their resignations to the Company and the respective
Subsidiaries, in form and content satisfactory to Buyer and effective as of
the Closing Date.
5.9 Employment Agreements. At the Closing, each of Dr. Gary Waters,
Dr. Larry Vint, Mr. William Bradley, and Mr. Alan Koepcke shall execute and
deliver an employment agreement with the Company, substantially in the forms
attached as Schedule 5.9 hereto (collectively, the "Employment Agreements").
5.10 Non-Competition Agreement. At the Closing, Seller shall execute
and deliver a non-competition agreement with the Company, in the form of
Schedule 5.10 attached hereto (the "Non-Competition Agreement").
5.11 Facility Lease. At the Closing, Seller shall execute and deliver
a lease agreement with the Company in the form of Schedule 5.11 attached
hereto (the "Facility Lease").<PAGE>
<PAGE>
5.12 DEKALB License. At the Closing, Seller shall execute and deliver
a license, in the form of Schedule 5.12 attached hereto, permitting Buyer and
the Company to use certain trademarks owned by Seller on a royalty-free,
worldwide, exclusive basis in perpetuity, with the right to sublicense, for
egg-laying hen breeding stock, eggs and related products (the "DEKALB
License").
5.13 Services Agreement. At the Closing, Seller shall execute and
deliver an agreement with the Company, in the form of Schedule 5.13 attached
hereto (the "Services Agreement"), whereby Seller agrees to provide certain
services to the Company.
5.14 Release of Guaranties and Liens. Prior to the Closing, Seller
shall take and shall cause the Company and each of the Subsidiaries to take
any and all actions which may be necessary to release and terminate any and
all guaranties, liens, claims, charges, security interests or other
encumbrances of any kind or nature whatsoever by the Company or the
Subsidiaries or against any of their respective assets or properties.
5.15 Divestment of Assets. On or after the Closing, Seller and Buyer
shall promptly cause the Company, at Seller's sole cost and expense but
without additional consideration to Buyer or the Company, to divest those
certain assets of the Company set forth on Schedule 5.15 hereto as soon as
practicable.
5.16 Assignment and Assumption of Account Payable. At the Closing,
Seller shall cause the Company to assign to Seller certain accounts
receivable due to the Company from PDG , RDG and Gortie International and
certain accounts payable, if any, owed by the Company to PDG, RDG and Gortie
International, and Seller shall assume from the Company such accounts
payable, pursuant to that certain Assignment and Assumption Agreement in the
form attached hereto as Schedule 5.16 (the "Assignment and Assumption
Agreement").
5.17 Tax Sharing Agreement. At the Closing, Seller shall terminate and
cause the Company and the Subsidiaries to terminate any tax sharing agreements
between Seller, on the one hand, and either the Company or the Subsidiaries,
or both, on the other hand. Any such tax sharing agreements shall have no
further force and effect for any present or future taxable year.
5.18 Non-Foreign Status Certificate. At the Closing, Seller shall
execute and deliver to Buyer a certification as to its non-foreign status in
the manner provided for in Treasury Regulation Section 11445-2(b)(2) in the
form of Schedule 5.18 attached hereto (the "Non-Foreign Status Certificate").
5.19 Post-Closing Covenants. Seller has informed Buyer that an
underground storage tank (each an "Illiopolis UST" and collectively, the
"Illiopolis USTs") is presently located or was at one time located, on each of
three parcels of real property owned by the Company and located in Sangamon
County, Illinois, and commonly referred to as "Parcel 18", "Parcel 31" and
"Parcel 33" (each an "Illiopolis Parcel" and collectively, the "Illiopolis
Parcels"). Seller also has informed Buyer that petroleum products have been
released from each Illiopolis UST. With respect to each Illiopolis UST,
Seller and Buyer agree as follows:
(a) Seller shall obtain from Buyer at the Closing quitclaim
deeds executed by the Company, dated the date of the Closing in favor of
Seller (each a "Quitclaim Deed") for each UST Parcel (as defined below),
with each such Quitclaim Deed (i) having attached thereto a legal
description for the land to be conveyed thereby conforming to the
applicable pro forma legal description set forth on Schedule 5.19
attached hereto and (ii) reserving unto the Company and its employees,
customers, invitees, visitors, contractors and agents, as a covenant
<PAGE>
<PAGE>
running with the applicable Non-UST Parcel (as defined below), a blanket
easement with a 99-year term for purposes of access, ingress and egress
to and from such UST Parcel and covering the entirety of such UST
Parcel. Upon the Closing, Seller shall be deemed for all purposes to be
the fee title owner of each UST Parcel, notwithstanding any delay in the
recording of such quitclaim deeds. Seller shall have each Quitclaim
Deed recorded in the Sangamon County, Illinois Recorder's Office only
after providing Buyer with written confirmation reasonably satisfactory
to Buyer of Seller's compliance with the Subdivision Requirements set
forth in Section 5.19(b) below with respect to the applicable UST
Parcel, and for that purpose, following its receipt of such written
confirmation, Buyer authorizes Seller to attach to such Quitclaim Deed,
prior to the recording, the changed legal description, if at all, based
on Seller's compliance with such Subdivision Requirements.
(b) In a prompt and diligent manner following the Closing,
Seller shall take all steps required by any and all Federal, state and
local laws, regulations, rules and requirements (including without
limitation, any record of survey requirements) relating to the division
or subdivision of land in Sangamon County, State of Illinois
(collectively, the "Subdivision Requirements") to subdivide each
Illiopolis Parcel into two parcels of land, consisting of (i) a parcel
with the minimum acreage of land permitted under the Subdivision
Requirements and with the minimum acreage reasonably required to
remediate the pollution conditions in and around each such Illiopolis
UST and having within its boundaries the Illiopolis UST located on such
Illiopolis Parcel and with the legal description of such parcel
conforming as close as possible to the applicable pro forma legal
description set forth on Schedule 5.19 attached hereto (each a "UST
Parcel") and (ii) the remainder of the applicable Illiopolis Parcel
(each a "Non-UST Parcel"). Seller and Buyer agree to cooperate mutually
to make any minor revisions to the applicable pro forma legal
descriptions set forth in Schedule 5.19 required to comply with such
Subdivision Requirements.
(c) Notwithstanding anything to the contrary contained in
Article 11 of this Agreement, Seller, on behalf of itself and its
successors and assigns, shall defend, indemnify and hold harmless Buyer,
Buyer's Affiliates, and any purchaser or transferee of an Illiopolis
Parcel from the Company or the Company's designated grantee (as
described in Section 5.19(d) below) and each of their respective
officers, directors, shareholders, employees and agents (collectively,
the "UST Indemnified Parties") from and against any and all claims,
demands, damages, liabilities, losses, costs, interest, penalties and
expenses (including attorneys' fees) of any kind or nature whatsoever
which may be asserted against, or sustained or incurred by the UST
Indemnified Parties or any of them, arising out of or related to the
Illiopolis USTs, including without limiting the generality of the
foregoing, any costs associated with the removal of any Illiopolis USTs
and the clean-up of any present or future discharge or release of any
Hazardous Substances into the soils or groundwater from any Illiopolis
UST irrespective of where such discharge or release occurs or is
discovered. Subject to Section 5.19(e) below, the indemnification
obligations of Seller contained in this Section 5.19(c) shall not be
subject to the limitations as to time and amount contained in Sections
11.1(d) and 11.1(e), respectively.
(d) At any time following the Closing, with respect to each UST
Parcel, provided Seller has complied with the Subdivision Requirements
as set forth in Section 5.19(b) above for such UST Parcel, within sixty
(60) days following written notice from the Company (which the Company
may give in its sole and absolute discretion) to Seller (the "Purchase
Notice"), Seller shall execute, and cause to be recorded in the Sangamon
<PAGE>
<PAGE>
County, Illinois Recorder's Office, a warranty deed in favor of the
Company (or the Company's designated grantee, if any, as stated in the
Purchase Notice), for purposes of conveying fee title to such UST Parcel
in favor of the Company or the Company's designated grantee, as the case
may be, without the payment of any consideration to Seller.
(e) Upon the conveyance of a UST Parcel by Seller in accordance
with Section 5.19(d) above, the indemnification obligations of Seller
set forth in Section 5.19(d) and in Sections 11.1(d) and 11.1(e) shall
cease and be of no further force or effect solely as to conditions
directly caused by the Illiopolis UST located on such UST Parcel;
provided, that such indemnification obligations as they relate to the
remaining UST Parcels not previously conveyed in accordance with Section
5.19(c) above shall remain in full force and effect without
reaffirmation by any party.
(f) Seller and Buyer agree to execute, or cause to be executed,
such documents and instruments as may be appropriate or necessary to
effect or confirm the matters contained in this Section 5.19.
(g) Buyer shall grant Seller reasonable easements for ingress
and egress to the UST Parcels to permit Seller to perform the
remediation activities contemplated pursuant to this Section 5.19.
5.20 Elimination of Intercompany Accounts. The current intercompany
account balance, deferred income tax liability and pension liability of the
Company, the balances of which as of December 31, 1994 are reflected on
Schedule 3.8 hereto, shall be cancelled as of the Closing Date.
ARTICLE 6
COVENANTS OF BUYER
6.1 Disclosure of Sale. Prior to the Closing, Buyer shall not make
any statement to the press, press release or other public announcement
regarding this Agreement or the transactions contemplated hereby, unless the
text and time of the release of any such statement have been approved by
Seller in writing.
6.2 Confidentiality. Buyer shall not, without the prior written
consent of Seller, disclose or acquiesce in the disclosure by any person or
entity, or use or enable use to the competitive detriment of Seller and/or the
Company, any non-public information regarding (a) the Company and its business
or financial condition, other than after the Closing, or (b) Seller and its
business or financial condition, contained in any documents or otherwise
furnished at any time to Buyer by or on behalf of the Company or Seller, to
any person or organization except Buyer's legal counsel, accountants,
financial advisors, investment bankers and its other authorized agents and
representatives, and to such persons only to the extent required for
activities directly related to the purchase of the Shares or other
transactions contemplated by this Agreement, except to the extent such
information has been publicly disclosed or is otherwise in the public domain
or is required to be disclosed by law or by a court of competent jurisdiction.
6.3 Best Efforts. Buyer shall use its best efforts to cause the
transactions contemplated hereby to be consummated on or before April 28, 1995
and to take any and all actions which may be required to be taken by Buyer
under this Agreement prior to the Closing Date. Buyer shall proceed as soon
as practicable in the procurement of all permits, consents and approvals and
in the taking of any other action, and the satisfaction of all other
requirements prescribed by law or otherwise necessary for consummation of the
transactions contemplated hereby on the terms herein provided, and shall
diligently prosecute the same.<PAGE>
<PAGE>
6.4 Cooperation. Buyer shall, without consideration or expense to
Buyer or the Company, cause the Company to cooperate with Seller in the
execution of any documents necessary or appropriate to complete the divestment
of assets described in Section 5.15 hereof; provided, however, that Seller
shall defend, indemnify and hold harmless Buyer and the Company from any
claims, demands, damages, liabilities, losses, costs, interest, penalties and
expenses (including attorneys' fees) of any kind or nature whatsoever which
may be asserted against, or sustained or incurred by Buyer or the Company as a
result of the execution of any such documents or other actions related to the
divestment of the assets and the ownership of such assets after the Closing
Date.
6.5 Access to Information and Personnel. From and after the Closing
Date, Buyer shall cause the Company and the Subsidiaries to grant to Seller
and its attorneys and accountants reasonable access during normal business
hours to the directors, officers, employees, attorneys and agents of the
Company and all business records of the Company in connection with (i) the
completion and filing of any tax returns or reports or audits, and (ii) the
prosecution or defense of any claim, except for any claims of Buyer or the
Company brought by or against Seller.
6.6 Trademarks. After the Closing, Buyer shall promptly cause the
Company, at Seller's sole cost and expense, to transfer and assign certain
trademarks of the Company set forth on Schedule 6.6 to Seller, and Seller
shall concurrently license back to the Company the rights to use such
trademarks pursuant to the terms of the DEKALB License. In no event shall
Buyer or the Company be required to transfer and assign any such trademarks to
Seller if Seller is or will be restricted or prevented in any manner from
licensing back to the Company the rights to use such trademarks pursuant to
the terms of the DEKALB License.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Buyer's Performance. The obligation of
Buyer to consummate the purchase of the Shares in accordance with this
Agreement is subject to the fulfillment of each of the following conditions,
any of which may be waived in writing by Buyer, in whole or in part, in its
sole discretion:
(a) Compliance with this Agreement.
(1) Seller shall have performed and satisfied all
covenants, obligations, agreements and conditions
required by this Agreement to be performed and
satisfied by it, on or prior to the Closing Date;
(2) The representations and warranties of Seller contained
in Article 3 above shall be true, correct and complete
in all material respects as of the date when made, and
on and as of the Closing Date, with the same force and
effect as if such representations and warranties had
been made on the Closing Date; and
(3) Seller shall have delivered to Buyer a certificate
dated as of the Closing Date, signed by Seller,
certifying the truth and correctness as of the Closing
Date of each of the representations and warranties of
Seller set forth in Article 3 above and the
fulfillment of the covenants of Seller set forth in
Article 5 above which are required by this Agreement
to be performed and satisfied on or prior to the
Closing Date.<PAGE>
<PAGE>
(b) No Material Adverse Change. As of the Closing Date, there
shall have been no material adverse change in the business, financial
condition, or results of operations of the Company and the Subsidiaries since
the date hereof (other than changes in the general economic conditions that
affect the world or national economy or the poultry industry generally;
provided, however, that such changes in general economic conditions or in the
poultry industry generally shall not be deemed to excuse any losses of the
Company's customers or any decline in the Company's sales revenues that are
materially in excess of the declines reflected in the poultry industry
generally for the relevant period). Seller shall deliver to Buyer a
certificate dated as of the Closing Date signed by Seller certifying that
there has been no such material adverse change other than as provided or
allowed herein.
(c) No Default. As of the Closing Date, neither the Company nor
the Subsidiaries shall be in default under, and no event shall have occurred
which would constitute a default (or any event which, with the giving of
notice or lapse of time or both, would constitute a default) under, any
Contract to which the Company or the Subsidiaries is a party, which default or
defaults individually or in the aggregate have or could have a material
adverse effect upon the business, financial condition, or results of
operations of the Company or the Subsidiaries.
(d) No Illegality. It shall not have become illegal, on or
prior to the Closing Date, under any statute, rule, order or regulation of or
in any applicable jurisdiction for Buyer to perform the transactions
contemplated by this Agreement, provided that such illegality shall not have
arisen by reason of any wrongful act or omission to act by Buyer.
(e) Governmental Consents and Approvals. Any and all necessary
approvals and consents from all governmental agencies and other third parties
to complete the transactions contemplated hereby shall have been obtained, and
such approvals and consents shall not have expired or been withdrawn as of the
Closing Date.
(f) Absence of Legal Challenge to Acquisition. As of the
Closing Date, there shall be no litigation, action, investigation, inquiry,
proceeding, order, writ, injunction, judgment or decree pending or threatened
relating to or affecting Seller in any court, governmental agency or
regulatory authority of or in any applicable jurisdiction prohibiting or
challenging the consummation of the purchase and sale of the Shares or any of
the other transactions specified in or required by the terms of this
Agreement, which, in the reasonable opinion of legal counsel for Buyer, could
make it necessary not to consummate such transactions.
(g) Approval of Documentation. The form and substance of all
certificates, instruments and other documents delivered to Buyer by Seller
under this Agreement shall be satisfactory in all respects to Buyer and its
legal counsel.
(h) Share Certificates. Seller shall have delivered to Buyer
the certificates representing, in the aggregate, all of the Shares to be
purchased and sold hereunder, registered in the name of Seller and duly and
validly endorsed by Seller for transfer to Buyer, free and clear of any and
all liens, encumbrances, security interests, restrictions or claims whatsoever
(other than restrictions on transfer or resale arising imposed by federal or
state securities laws) ("Share Certificates").
(i) Execution of Agreements. Each of the Facility Lease, the
Services Agreement, the Non-Competition Agreement, the DEKALB License and the
Employment Agreements shall have been executed in form and substance
acceptable to Buyer.<PAGE>
<PAGE>
(j) Divestment. Seller shall have been diligently pursuing the
completion of the divestment of the assets of the Company in accordance with
Section 5.15 hereof.
7.2 Conditions Precedent to Seller's Performance. The obligation of
Seller to consummate the sale of the Shares in accordance with this Agreement
is subject to the fulfillment of each of the following conditions, any of
which may be waived in writing by Seller, in whole or in part, in its sole
discretion:
(a) Compliance with this Agreement.
(1) Buyer shall have performed and satisfied all
covenants, obligations, agreements and conditions
required by this Agreement to be performed and
satisfied by it, on or prior to the Closing Date;
(2) The representations and warranties of Buyer contained
in Article 4 above shall be true, correct and complete
in all material respects as of the date when made, and
on and as of the Closing Date, with the same force and
effect as if such representations and warranties had
been made on the Closing Date; and
(3) Buyer shall have delivered to Seller a certificate
signed by Buyer and dated as of the Closing Date,
certifying as to the truth and correctness of each of
the representations and warranties of Buyer set forth
in Article 4 above and the fulfillment of the
covenants of Buyer set forth in Article 6 above which
are required by this Agreement to be performed or
satisfied on or prior to the Closing Date.
(b) No Illegality. It shall not have become illegal, on or
prior to the Closing Date, under any statute, rule, order or regulation of or
in any applicable jurisdiction for Seller to perform the transactions
contemplated by this Agreement, provided that such illegality shall not have
arisen by reason of any wrongful act or omission to act by Seller.
(c) Government Consents and Approvals. Any and all necessary
approvals and consents from all governmental agencies and other third parties
to complete the transactions contemplated hereby shall have been obtained, and
such approvals and consents shall not have expired or been withdrawn as of the
Closing Date.
(d) Absence of Legal Challenge to Acquisition. As of the
Closing Date, there shall be no litigation, action, investigation, inquiry,
proceeding, order, writ, injunction, judgment or decree pending or threatened
relating to or affecting Buyer in any court, governmental agency or regulatory
authority of or in any applicable jurisdiction prohibiting or challenging the
consummation of the purchase and sale of the Shares or any of the other
transactions specified in or required by the terms of this Agreement, which,
in the reasonable opinion of legal counsel for Seller would make it necessary
not to consummate such transactions.
(e) Approval of Documentation. The form and substance of all
certificates, instruments and other documents delivered to Seller by Buyer
under this Agreement (other than the Employment Agreements) shall be
satisfactory in all respects to Seller and its legal counsel.<PAGE>
<PAGE>
(f) Execution of Agreements. Each of the Facility Lease, the
Services Agreement, the Non-Competition Agreement, the DEKALB License and the
Employment Agreements shall have been executed in form and substance
acceptable to Seller.
ARTICLE 8
EMPLOYEE BENEFIT PLANS
8.1 Employee Benefit Plans. Effective as of the Closing Date and
except as otherwise provided herein, Employees shall cease to be covered under
Seller's Employee Benefit Plans. Except as provided herein, Seller shall have
no obligation to make any payment to or on behalf of the Employees on or after
the Closing Date with respect to Seller's Employee Benefit Plans.
8.2 Defined Benefit Plan. With respect to the DEKALB Genetics
Corporation Pension Plan (the "DGC Pension Plan"), Seller agrees that it shall
be solely responsible (i) to the Employees with respect to benefits accrued
thereunder as of the Closing Date, (ii) for the making of all required
contributions to the DGC Pension Plan, in accordance with the terms of the DGC
Pension Plan, with respect to the Employees covered by the DGC Pension Plan
for periods ending on the Closing Date and (iii) the timely payment of all
benefit amounts due to the Employees in accordance with the terms of the DGC
Pension Plan. Benefits accrued under the DGC Pension Plan shall be
distributed to the Employees or used to purchase annuity policies with
insurance companies.
8.3 Defined Contribution Plan.
(a) Plan Liabilities. With respect to the DEKALB Genetics
Corporation Savings and Investment Plan (the "SIP"), except as otherwise
provided, Seller agrees that it shall be solely responsible to the Employees
with respect to benefits accrued thereunder as of the Closing Date. Seller
shall contribute to the SIP in accordance with the terms of said SIP, all
amounts attributable to: (i) the Employees' payroll withholding through and
including the Closing Date; and (ii) the Company's fifty percent (50%)
matching contribution through and including the Closing Date.
(b) Transfer of Plan Assets. Seller shall cause an amount equal
to the value of the account balances attributable to the Employees under the
SIP as of the Closing Date to be transferred to a replacement defined
contribution plan established and maintained by Buyer (the "Transferee Plan").
The transfer of assets shall consist of cash or other such property as
mutually agreed upon by Buyer and Seller, and shall occur as soon as
practicable after satisfaction of the following requirements by Buyer.
Transfer to the Transferee Plan contemplated above shall be made only after
Buyer shall furnish to Seller on or before the date on which such transfer is
to be made, an opinion of counsel for Buyer, in form and substance
satisfactory to Seller, to the effect that: (i) the Transferee Plan and its
related trust are qualified under Section 401(a) and 501(a) of the Code;
(ii) the transfer of such accounts and related assets and liabilities to the
Transferee Plan and its related trust will not adversely affect such
qualification; (iii) the acceptance of the transferred accounts and related
assets by the Transferee Plan is in accordance with all applicable
requirements of ERISA and the Code and regulations thereunder; and (iv) such
transfer will be effected so that each transferred account will become an
asset of the Transferee Plan, held for the account of each respective
Employee, and that the SIP and its related trust shall be relieved by such
transfer of assets of any further obligations with respect to the assets
transferred. In turn, Seller shall furnish to Buyer on or before the date of
transfer, an opinion of the Human Resources Advisory Group of Coopers &
Lybrand (Chicago office), in form and substance satisfactory to Buyer, to the
effect that the SIP and its related trust are qualified under Sections 401(a)
and 501(a) of the Code. Seller and Buyer shall make such filings as are<PAGE>
<PAGE>
required under Section 6058(a) of the Code with respect to the transfer,
including the filing of Form 5310 with the Internal Revenue Service.
8.4 Welfare and Other Benefit Plans
(a) Transition Coverage. In the event that any Welfare Plan
provides benefits under a policy or contract issued to Seller by any insurance
company or other provider (including the Seller in the case of a self-insured
arrangement) of health care, disability or life insurance benefits, Seller, if
Buyer so requests, agrees to cooperate with Buyer to the extent reasonably
necessary to assist in the establishment of replacement coverage(s) with
Seller's existing providers. Seller shall be liable for the full cost and
expense of any entitlement to benefits which have been accrued or the expenses
for which the Employees are entitled to reimbursement have been incurred, but
not paid, at the Closing Date, including, but not limited to, health,
disability, and tuition reimbursement, (but excluding vacation), attributable
to service with the Seller prior to the Closing Date, under such Seller's
Employee Benefit Plans. Seller shall retain responsibility for the full cost
and expense of any entitlement to worker's compensation benefits which have
been accrued or the expense for which the Employee is entitled to
reimbursement has been incurred, but not paid, at the Closing Date,
attributable to service with Seller prior to the Closing Date.
(b) Continuation Coverage. Seller agrees that it shall be
solely responsible for the provision of health care continuation coverage
required pursuant to the terms of COBRA and for any retiree welfare benefit
payable for (i) those Employees (and their spouses and dependents) whose
employment with the Company or the Subsidiaries is terminated on or prior to
the Closing , and (ii) those former employees of the Company or the
Subsidiaries (and their spouses and dependents) whose entitlement to such
continuation coverage occurred on or before the Closing Date.
8.5 Additional Information. All the Employees and their beneficiaries
and dependents of any Employee Benefit Plan, and all available data and
benefits applicable to each of them under the terms of each Employee Benefit
Plan (including, without limitation, complete pertinent pay history and all
administrative records), shall be identified and set forth in records
delivered, at the election of Buyer, as soon as practicable after the Closing
Date by Seller to Buyer.
ARTICLE 9
THE CLOSING
9.1 The Closing. The purchase and sale of the Shares shall be
consummated at the Closing which shall take place on the Closing Date, or as
may be extended by mutual written agreement of the parties, following
fulfillment or waiver, in accordance with this Agreement, of all conditions to
the Closing. The Closing shall occur on April 28, 1995 at 9:00 a.m., at the
offices of Seller.
9.2 Obligations of Seller. At the Closing, Seller shall deliver, or
shall cause the Company to deliver, to Buyer:
(a) The certificates required by Sections 7.1(a)(3) and 7.1(b)
above;
(b) The Share Certificates;
(c) The Corporate Records of the Company and the Subsidiaries;
(d) Good standing certificates for the Company and each of the
Subsidiaries issued by the jurisdictions in which they are incorporated or
qualified;<PAGE>
<PAGE>
(e) The duly executed resignations required by Section 5.8 above;
(f) The duly executed Employment Agreements;
(g) The duly executed Non-Competition Agreement;
(h) The duly executed Facility Lease;
(i) The duly executed Services Agreement;
(j) The duly executed DEKALB License;
(k) The duly executed Non-Foreign Status Certificate; and
(l) Possession of the Premises and all of the books and records
of the Company.
9.3 Obligations of Buyer. At the Closing, and against delivery of
each of the items required to be delivered by Seller and the Company under
Section 9.2 above, Buyer shall deliver, or shall cause the Company to deliver,
to Seller:
(a) The certificate required by Section 7.2(a)(3) above;
(b) The Purchase Price;
(c) The duly executed Non-Competition Agreement;
(d) The duly executed Facility Lease;
(e) The duly executed Services Agreement; and
(f) The duly executed DEKALB License.
9.4 Further Assurances. Each of the parties hereto agrees that, at
any time and from time to time after the Closing Date, it will take without
consideration any and all actions and execute and deliver to any other party
such further instruments or documents as may reasonably be required to give
effect to the transactions contemplated under this Agreement.
9.5 Cooperation on Taxes. On or after the Closing Date, the parties
hereto shall cooperate with respect to all matters pertaining to Taxes arising
out of the transactions contemplated hereunder which are payable by the other
party, and shall provide such other party with such information and
documentation, including, without limitation, information necessary for the
preparation of tax returns as such party shall reasonably request. Seller
shall exercise, at its sole cost and expense, complete control over the
handling, disposition and settlement of any governmental inquiry, examination
or proceeding that could result in a determination with respect to Taxes due
or payable by the Company or any Subsidiary for which Seller may be liable, or
against which Seller may be required to indemnify Buyer , the Company or any
Subsidiary pursuant hereto. Seller shall, however, promptly notify the
Company if, in connection with any such inquiry, examination or proceeding,
any government authority proposes in writing to make any assessments or
adjustments with respect to the Taxes of the Company or any Subsidiary, which
assessments or adjustments could affect the Company or any Subsidiary
following the Closing Date, and shall consult with the Company with respect to
any such proposed assessment or adjustment. Buyer shall notify Seller in
writing promptly upon learning of such inquiry, examination or proceeding.
Buyer shall cause the Company and its Subsidiaries to cooperate with Seller,
as Seller may reasonably request, in any such inquiry, examination or
proceeding.<PAGE>
<PAGE>
ARTICLE 10
TERMINATION PRIOR TO
THE CLOSING
10.1 Events Permitting Termination. This Agreement and the
transactions contemplated hereby may be terminated at any time prior to the
Closing Date upon the occurrence of any of the following:
(a) By the mutual consent in writing of Buyer and Seller;
(b) By either Buyer or Seller, upon ten (10) days' prior written
notice to the other parties to this Agreement, in the event of a material
default in the due and timely performance by such other party of any of its
warranties, covenants, agreements or obligations under this Agreement;
provided, however, that the defaulting party shall have a period of time in
which to cure such default, which period shall expire on the earlier to occur
of (i) the day which is twenty (20) days after the date on which such written
notice is given, or (ii) the Closing Date; or
(c) By either Buyer or Seller, by written notice to the other
parties to this Agreement, if any of the conditions precedent to the
terminating party's performance, as set forth in Article 7 above, shall not
have been satisfied as of the Closing Date, and such conditions are not duly
waived in accordance with the provisions hereof.
10.2 Procedure Upon Termination. In the event of termination of this
Agreement pursuant to Section 10.1 above, the party electing to terminate or
abandon this Agreement shall give notice of such election to terminate or
abandon this Agreement to the other parties hereto in the manner specified in
Section 13.2 below, and the transactions contemplated hereby shall be
terminated or abandoned without further action by any party. If the
transactions are terminated or abandoned as provided above:
(a) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) All confidential information received by any party hereto
with respect to the business of any other party shall be treated in accordance
with Sections 5.5 and 6.2 above; and
(c) No party hereto shall have any liability or further
obligation to any other party to this Agreement except as stated in this
Section 10.2.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by Seller
(a) Seller (sometimes referred to in this Article 11 as
"Indemnitor") shall defend, indemnify and hold Buyer and its Affiliates and
their respective officers, directors, shareholders, employees and agents (the
"Indemnified Parties"), harmless from and against any and all claims, demands,
damages, liabilities, losses, costs, interest, penalties and expenses
(including attorneys' fees) of any kind or nature whatsoever which may be
asserted against, or sustained or incurred by the Indemnified Parties or any
of them, as a result of a breach of any representation, warranty or covenant
contained in this Agreement, or in any documents delivered pursuant hereto,
including, without limitation, any Schedule or certificate delivered pursuant
hereto; provided, however, that Buyer shall notify Seller within six (6)<PAGE>
<PAGE>
months following the Closing Date of any breaches of the representations and
warranties contained in Sections 3.11 and 3.14 hereof.
(b) Subsequent to the Closing Date, Indemnitor shall defend,
indemnify and hold Buyer, the Company, the Subsidiaries and their respective
officers, directors, employees and agents, harmless from and against any and
all claims, demands, damages, liabilities, losses, costs, interest, penalties
and expenses (including attorneys' fees) of any kind or nature whatsoever
which may be asserted against or sustained or incurred by Buyer, the Company,
the Subsidiaries or their respective officers, directors, employees and
agents, arising out of or in connection with (i) any business or transactions
carried out by the Company or the Subsidiaries prior to the Closing Date, (ii)
any act or omission of the Indemnitors, the Company or the Subsidiaries or
their respective officers, directors, shareholders, employees or agents
occurring prior to the Closing Date, and (iii) subject to Seller's right of
first refusal to acquire such real and personal property, any legally-mandated
divestiture of the Company's real or personal property in Clarion, Iowa.
(c) Without limiting the generality of the foregoing Sections
11.1(a) and 11.1(b) above, and in addition to Indemnitor's obligations under
Section 11.1(a) above, Indemnitor shall indemnify, defend and hold Buyer, the
Company and the Subsidiaries and their respective officers, directors,
employees and agents harmless from and against any and all liabilities for
<PAGE>
Taxes, whether or not due, relating to, accrued for or arising from any
periods on or prior to the Closing Date with respect to transactions or
business occurring prior to the Closing Date.
(d) The obligations of Seller pursuant to this Section 11.1
shall survive for four (4) years following the Closing Date.
(e) Seller shall have no obligation to indemnify Buyer under
Sections 11.1(a) and (b) unless and then only to the extent that Buyer shall
have incurred claims, demands, damages, liabilities, losses, costs, interest,
penalties and expenses (including attorneys' fees) under Sections 11.1(a) and
(b) in excess of One Hundred Thousand Dollars ($100,000) (the "Deductible");
provided, however, that the amounts paid by Seller to Buyer upon Seller's
exercise of its right of first refusal pursuant to Section 11.1(b)(iii) above
shall not be included for purposes of determining whether Buyer shall have met
the Deductible. Notwithstanding anything contained herein to the contrary,
the aggregate liability of Seller under Sections 11.1(a) and (b) shall not
exceed Twelve Million Five Hundred Thousand Dollars ($12,500,000).
11.2 Indemnification by Buyer.
(a) Buyer agrees to defend, indemnify and hold Seller harmless
from and against any and all claims, demands, damages, liabilities, losses,
costs, interest, penalties and expenses (including attorneys' fees) of any
kind or nature whatsoever which may be asserted against Seller or sustained or
suffered by Seller based upon, or related to, arising out of (i) a breach of
any representation, warranty or covenant contained in Articles 4 and 6 above,
(ii) any business or transactions carried out by the Company or the
Subsidiaries after the Closing Date, and (iii) any act or omission of Buyer
or the Company or the Subsidiaries or their respective officers, directors,
shareholders, employees or agents occurring after the Closing Date.
(b) The obligations of Buyer pursuant to this Section 11.2 shall
survive for four (4) years following the Closing Date.
11.3 Third Party Claims. If a claim by a third party is made against
any of the indemnified parties, and if such indemnified party intends to seek
indemnity with respect thereto under this Article 11, such indemnified party
shall promptly notify in writing Buyer or Seller, as the case may be, of such
<PAGE>
<PAGE>
claim. If any indemnified party or parties fails to provide the foregoing
written notice in a timely manner, which failure to notify results in or
otherwise gives rise to any material prejudice to the defense of such claim,
the indemnified party or parties shall be deemed to have waived its or their
rights to indemnification under this Article 11 from the indemnifying party or
parties with respect to the claim for which timely written notice was not
given. The indemnifying party shall have thirty (30) days after receipt of
the above-mentioned written notice to commence to undertake, conduct and
control, through counsel of its own choosing and at its expense, the
settlement or defense therefor, and the indemnified party shall cooperate in
connection therewith; provided that: (a) the indemnifying party shall not
thereby permit to exist any lien, encumbrance or other adverse charge upon any
asset of any indemnified party, (b) the indemnifying party shall permit the
indemnified party to participate in such settlement or defense through counsel
chosen by the indemnified party, provided that the fees and expenses of such
counsel shall be borne by the indemnified party, (c) the indemnifying party
shall agree promptly to reimburse the indemnified party for the full amount of
any loss resulting from such claim and all related expenses incurred by the
indemnified party within the limits of this Article 11, except for counsel
fees under Section 11.3(b), and (d) the indemnified party shall have the right
to employ its own counsel, at such indemnified party's expense, if such
indemnified party reasonably concludes that such action, suit or proceeding
involves to a significant extent matters beyond the scope of the indemnity
agreement contained in this Article 11, or that there may be defenses
available to it (or them) which are different from or additional to those
available to the indemnifying party, except that the portion of such fees and
expenses reasonably related to matters covered by the indemnity agreement set
forth in this Article 11 shall be borne by the indemnifying party. So long as
the indemnifying party is reasonably contesting any such claim in good faith,
the indemnified party shall not pay or settle any such claim. Notwithstanding
the foregoing, the indemnified party shall have the right to pay or settle any
such claim, provided that in such event the indemnified party shall waive any
right to indemnity therefor by the indemnifying party. If the indemnifying
party does not notify the indemnified party within thirty (30) days after
receipt of the indemnified party's written notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the indemnified
party shall have the right to contest, settle or compromise the claim in the
exercise of its exclusive discretion at the expense of the indemnifying party.
The indemnified party shall, however, notify the indemnifying party in writing
of any compromise or settlement of any such claim.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The respective representations and warranties of the parties contained
herein or in any certificates or the documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto, and shall survive for four (4) years following the
Closing.
ARTICLE 13
MISCELLANEOUS
13.1 Expenses. Buyer, on behalf of itself, and Seller, on behalf of
itself and the Company, shall each bear its own expenses in connection with
the purchase and sale of the Shares and the other transactions contemplated by
this Agreement, including the fees of attorneys, accountants, advisors,
brokers, investment bankers and other representatives. None of the expenses,
fees or taxes of or payable by Seller shall be borne by or charged to the
Company or any of the assets of the Company.<PAGE>
<PAGE>
13.2 Notices and Legal Process. Except as otherwise provided in this
Agreement, all notices and other communications and legal process shall be in
writing and shall be personally delivered transmitted by telecopier, as
elected by the party giving such notice, addressed as follows:
(a) If to Buyer:
Central Farm of America Inc.
780 Third Avenue, 37th Floor
New York, New York 10017
Attn: Mr. Toshio Kama
President
Fax: 212-759-0724
With a copy to:
Toshoku Ltd.
4-3 Nihonbashi-Muromachi 2-chome
Chuo-ku, Tokyo, 103, Japan
Attn: Mr. Masaru Omizo
Division General Manager
Fresh Foods & Livestock Division
Fax: 011-813-3245-2061
(b) If to Seller:
DEKALB Genetics Corporation
3100 Sycamore Road
Dekalb, Illinois 60115
Attn: Mr. Thomas Rauman, Vice President and CFO
Fax: 815-758-3711
With a copy to:
DEKALB Genetics Corporation
3100 Sycamore Road
Dekalb, Illinois 60115
Attn: John H. Witmer, Jr., Esq.
Senior Vice President and General Counsel
Fax: 815-758-6953
Notices shall be deemed to have been given: (i) on the date of receipt, if
delivered personally, or (ii) on the next business day after transmission, if
by telecopier (and appropriate confirmations have been received by the
noticing party). Any party hereto may change its address or telecopier number
specified above by giving written notice to the other parties hereto in the
same manner as specified in this Section 13.2.
13.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall constitute but one and the same instrument.
13.4 Waiver and Amendment. Any party may by written instrument extend
the time for the performance of any of the obligations or other acts of any
other party hereunder and may waive (a) any inaccuracies of any other party in
the representations or warranties contained in this Agreement or in any
document delivered pursuant hereto, (b) compliance with any of the covenants,
undertakings or agreements of any other party, or satisfaction of any of the
conditions to its or their obligations, contained in this Agreement, or (c)
the performance (including performance to the satisfaction of a party or its
legal counsel) by any other party of any of its obligations set out herein.
Any waiver, amendment or supplement hereof shall be in writing.<PAGE>
<PAGE>
13.5 Entire Agreement. Unless otherwise specifically agreed in
writing, this Agreement and the Schedules attached hereto represent the entire
understanding of the parties with reference to the transactions set forth
herein, and supersede all prior representations, warranties, understandings
and agreements heretofore made by the parties, and neither this Agreement nor
any provisions hereof may be amended, waived, modified or discharged except by
an agreement in writing signed by the party against whom the enforcement of
any amendment, waiver, change or discharge is sought.
13.6 Binding Agreement; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns. Seller may not transfer or assign its rights
or obligations under this Agreement without obtaining the prior written
consent of Buyer. Buyer may transfer or assign its rights , but not its
obligations, under this Agreement to any of its Affiliates without obtaining
the prior consent of Seller. Buyer shall not otherwise assign its rights or
obligations under this Agreement without Seller's prior consent.
13.7 Governing Law and Attorneys' Fees. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Illinois. In the event of any action at law or suit in equity in relation to
this Agreement or any Schedule or other instrument or agreement required
hereunder, the prevailing party in such action or suit shall be entitled to
receive its attorneys' fees and all other costs and expenses of such action or
suit.
13.8 Captions. The captions of the various Sections and subsections
hereof and on the Schedules attached hereto are for convenience of reference
only, and shall not affect the meaning or construction of any provision hereof
or of any such Schedules.
13.9 Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to
any party to this Agreement, nor shall any provision give any third persons
any right of subrogation or action over or against any party to this
Agreement.
13.10 Severability; Construction. In the event any provision hereof
is determined to be invalid or unenforceable, the remaining provisions hereof
shall be deemed severable therefrom and shall remain in full force and effect.
Words and phrases defined in the plural shall also be used in the singular and
vice versa and be construed in the plural or singular as appropriate and
apparent in the context used.
13.11 Schedules. All Schedules referred to in this Agreement are
attached hereto and are incorporated herein by this reference as if fully set
forth herein. For purposes of this Agreement, any item in a Schedule relating
to a specific representation and warranty shall be deemed disclosed in
connection with the specific representation and warranty to which it is
specifically referenced, unless Buyer has actual knowledge that an item
contained in any such Schedule applies to any other Schedule, in which case
such item shall be deemed to be disclosed in such other Schedule.
13.12 Confidentiality of Agreement. Except and solely to the extent
disclosure is required to comply with applicable securities laws or to rules
of any exchange where the parties' shares are traded (including NASDAQ), the
parties, and each of them, further acknowledge and agree that no party shall
disclose the existence or terms and conditions of this Agreement or any of the
Schedules and other documents delivered pursuant hereto, unless and until a
specific order or other decree has been issued by a court of competent<PAGE>
<PAGE>
jurisdiction, and such order or other decree shall specifically limit any and
all disclosures to the counsel and the independent accountants for the party
obtaining such order or other decree; provided, however, that Seller has
advised Buyer that Seller will disclose this Agreement in connection with the
filing of its Current Report on Form 8K, Quarterly Report on 10Q and/or Annual
Report on Form 10K with the U.S. Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"BUYER"
CENTRAL FARM OF AMERICA INC.
By: ___________________
Name: Kunio Honda
Title: Director
"SELLER"
DEKALB GENETICS CORPORATION
By: ___________________
Name: Bruce P. Bickner
Title: Chairman and CEO
<PAGE>
<PAGE>
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (the "Agreement") is made this 28th day
of April, 1995, by and between DEKALB Genetics Corporation, a Delaware
corporation (the "Licensor"), and DEKALB Poultry Research, Inc., a Delaware
corporation (the "Licensee").
WHEREAS, Licensee is in the business of researching, developing,
producing, hatching and selling egg-laying hen breeding stock, eggs, and
related poultry products around the world (the "Current Business");
WHEREAS, in connection with the Current Business, Licensee has used and
currently uses certain trademarks (the "Trademarks"), as listed on Exhibit "A"
attached hereto, as it may be amended from time to time pursuant to Section 2
below;
WHEREAS, pursuant to that certain Stock Purchase Agreement dated as of
April 28, 1995, between Licensor and Central Farm of America Inc., a Delaware
corporation (the "Stock Purchase Agreement"), Licensor has agreed to grant to
Licensee a perpetual, exclusive, world-wide and royalty-free right to use the
Trademarks and the New Trademarks (as defined in Section 2 below) in
connection with the Current Business upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties hereby
agree as follows:
1 Grant of License. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts
from Licensor, a perpetual, exclusive, world-wide, royalty-free license to use
the Trademarks and the New Trademarks solely in connection with the Current
Business, together with the right to sublicense such rights for use in
connection with the Current Business as set forth herein. During the term of
this Agreement, Licensor shall not authorize or permit any other party to use
or register the Trademarks or the New Trademarks in any manner which is
inconsistent with Licensee's rights under this Agreement, and Licensee shall
not object to Licensor's use of the Trademarks or the New Trademarks outside
the scope of the Current Business.
2 Amendment of Agreement Regarding Future Registrations. Exhibit
"A" attached hereto shall be amended from time to time pursuant to Section 6.6
of the Stock Purchase Agreement which provides that Licensee shall assign
those registrations set forth on Exhibit "B" attached hereto to Licensor and
Licensor shall license the marks in those registrations to Licensee hereunder.
At the request and expense of Licensee, Licensor shall obtain, through
Licensor's execution and filing of any and all documents, and taking of any
and all actions necessary to register in Licensor's name for purposes of the
Current Business, registrations of: (a) the Trademarks for the Current
Business in any countries where such Trademarks are not then registered, and
(b) any new trademarks or service marks containing the word "DEKALB" for the
Current Business that do not infringe any then existing trademark (other than
the Trademarks and the New Trademarks) which includes the "DEKALB" word mark
in combination with a logo used by Licensor (collectively, the "New
Trademarks"). Each of the New Trademarks shall be listed on Exhibit "C"
attached hereto and shall become subject to this Agreement upon the filing of
its application for registration.
3 Ownership and Title. Licensor represents and warrants that
Licensor has good, valid and marketable title to the
Trademarks and that the use of the Trademarks as licensed pursuant to the
terms of this Agreement does not infringe any third party's rights.
<PAGE>
<PAGE>
4 Quality Control Standards. During the term of this Agreement,
Licensee shall maintain positive breeding value estimates for hen housed egg
numbers and egg mass based upon the Best Linear Unbiased Predictor (BLUP), or
such other equivalent technology which measures the number and mass of eggs
produced by the egg-laying hen breeding stock (the "Quality Control
Standards"), for the maternal grandmother lines marketed and sold, directly or
indirectly, under the Trademarks or the New Trademarks. To enable Licensor to
confirm that the Quality Control Standards are being met, Licensee shall
provide Licensor with selection summaries which shall be compiled by Licensee
at least once a year, and Licensor shall have its population geneticist review
and verify the contents of such summaries by inspecting from time to time
during reasonable business hours Licensee's premises, representative samples
of the subject product lines and the supporting data and documentation of such
selection summaries. Any disputes relating to Licensee's failure to meet the
Quality Control Standards under this Section 4 shall be submitted to and
decided by arbitration pursuant to Section 12(j) hereof. All selection
summaries, data, documentation and other information provided to Licensor
pursuant to this Section 4 shall be deemed to be confidential proprietary
information (the "Proprietary Information"). Licensor shall not disclose or
acquiesce in the disclosure by any person or entity (except to the extent
necessary to satisfy its obligations pursuant to this Section 4; provided that
Licensor shall ensure that the persons to whom any disclosures are made agree
to be bound by the confidentiality provisions of this Section 4), or use or
enable a third party to use to the competitive detriment of Licensee the
Proprietary Information without the written consent of Licensee.
5 Indemnification.
(1) Indemnification by Licensee. Licensee shall defend,
indemnify and hold Licensor harmless from and against any and all claims,
demands, damages, liabilities, losses, costs, interest, penalties and expenses
(including attorneys' fees) which may be asserted against or sustained or
incurred by Licensor arising out of or in connection with any alleged defects
in the DPRI Products which are marketed and sold by Licensee under the
Trademarks and the New Trademarks. The provisions of this Section 5(a) shall
survive any termination of this Agreement.
(2) Indemnification by Licensor. Licensor shall defend,
indemnify and hold Licensee and its sublicensees harmless from and against any
and all claims, demands, damages, liabilities, losses, costs, interest,
penalties and expenses (including attorneys' fees) which may be asserted
against or sustained or incurred by Licensee arising out of or in connection
with any third party claim for trademark infringement or unfair competition
related thereto based upon Licensee's use of the Trademarks and the New
Trademarks. The provisions of this Section 5(b) shall survive any termination
of this Agreement.
6 Termination. This Agreement may be terminated:
(a) by mutual agreement of the parties hereto;
(b) by Licensee's express written abandonment as to any specific
Trademarks or New Trademarks in any country or countries;
(c) by Licensor if Licensor gives written notice to Licensee
specifying in detail Licensee's alleged failure to meet the
Quality Control Standards and Licensee fails to commence
reasonable steps to cure such alleged failure within one (1)
year after its receipt of such written notice from Licensor;
or
<PAGE>
<PAGE>
(d) by Licensor if (i) Licensee sells or assigns all or
substantially all of the business and operations related to
the Current Business to a third party, (ii) the rights under
this Agreement are not sold or assigned in connection with
such sale, and (iii) Licensee does not continue any portion
of the Current Business after such sale or assignment.
7 Effect of Termination. Upon termination of this Agreement, or
any part thereof, pursuant to Section 6 above, Licensee and its sublicensees
shall, within a reasonable period of time, not to exceed two (2) years,
discontinue all use of the then terminated Trademarks and New Trademarks in
any relevant country or countries licensed under this Agreement, and Licensee
or Licensor, as applicable, shall cancel all filings or registrations for such
terminated Trademarks and New Trademarks made pursuant to Section 8 hereof.
8 Registered User Agreements. In those countries which require or
permit registration of the use of trademarks under license, or the filing of
documents in addition to or in lieu of this Agreement, Licensor agrees to
cooperate with Licensee to execute and file registered user agreements, other
and additional license agreements or other documents which are necessary or
advisable to record Licensee as the registered user or licensee of the
Trademarks and/or the New Trademarks in such countries. Licensee shall be
responsible for the preparation and filing of such documents, and Licensor
shall bear all fees, costs and expenses related thereto.
9 Maintenance of Trademarks. During the term of this Agreement,
Licensor shall at all times maintain current, valid and effective the
registrations for the Trademarks and the New Trademarks, except for the
Trademarks or New Trademarks which have been expressly abandoned pursuant to
Section 6(b) hereof. Notwithstanding the foregoing, Licensee shall have the
right, but not the obligation, to take any and all actions necessary for
Licensor to maintain the registrations for the Trademarks and the New
Trademarks. In the event that Licensee exercises such right, Licensor shall
cooperate with Licensee to the fullest extent, including, without limitation,
the execution and filing of any renewal applications or other documents
necessary to maintain the registrations. Licensor shall bear all fees, costs
and expenses related to the maintenance of the Trademarks and the New
Trademarks; provided, however, if any of the Trademarks or the New Trademarks
are used solely by Licensee for the Current Business, Licensee shall bear all
fees, costs and expenses related to the maintenance of such Trademarks or New
Trademarks. Licensor shall have no obligation to maintain the Trademarks or
the New Trademarks if Licensee fails to remit such fees, costs and expenses to
Licensor within sixty (60) days following Licensor's written request for
payment which shall set forth in reasonable detail the nature of such fees,
costs and expenses.
10 No Agency. Licensor and Licensee agree that they are
independent contractors for purposes of this Agreement. Nothing herein shall
be construed to create any relationship of agent and principal, partnership or
joint venture between the parties. Neither party shall have the authority to
bind or obligate or represent that it has authority to bind or obligate the
other party.
11 Prosecution of Infringers. During the term of this Agreement,
Licensee agrees that it shall promptly notify Licensor of any instances of
unauthorized use of the Trademarks or the New Trademarks by third parties
which Licensee in its good faith judgment believes may impact the Current
Business, and shall cooperate and provide reasonable assistance to Licensor in
the investigation and prosecution of such infringers. Licensor shall
investigate and prosecute all such claims of infringement and shall oppose all
attempted registrations of potentially confusingly similar trademarks, trade
names or service marks. All fees, costs and expenses of such investigation,
prosecution or opposition shall be borne by Licensee if such investigation,
<PAGE>
<PAGE>
prosecution or opposition relates solely to the infringement of a Trademark or
New Trademark, or the registration of a potentially confusingly similar
trademark, trade name or service mark, in connection with the Current
Business. All fees, costs and expenses of such investigation, prosecution or
opposition shall be borne by Licensor if such investigation, prosecution or
opposition relates solely to the infringement of a Trademark, New Trademark or
any other trademark, trade name or service mark of Licensor, or the
registration of a potentially confusingly similar trademark, trade name or
service mark, in connection with Licensor's business. The fees, costs and
expenses of any other investigation, prosecution or opposition shall be borne
by the parties as mutually agreed on a case by case basis based upon the
relative adverse effect of such infringing or confusingly similar trademarks,
trade names or service marks on Licensee's and Licensor's respective business
operations.
12 Miscellaneous.
(1) Notices and Legal Process. Except as otherwise provided in
this Agreement, all notices and other communications and legal process shall
be in writing and shall be personally delivered or transmitted by telecopier,
as elected by the party giving such notice, addressed as follows:
(i) If to Licensee:
DEKALB Poultry Research, Inc.
2210 Bethany Road
Dekalb, Illinois 60115
Attn: Dr. Gary Waters
Fax: (815) 758-0402
With a copy to:
Toshoku Ltd.
4-3 Nihonbashi Muromachi 2-chome
Chuo-ku, Tokyo 103, Japan
Attn: Mr. Masaru Omizo
Division General Manager
Fresh Foods & Livestock Division
Fax: 011-813-3245-2393
(ii) If to Licensor:
DEKALB Genetics Corporation
3100 Sycamore Road
Dekalb, Illinois 60115
Attn: Mr. Thomas Rauman, Vice President and CFO
Fax: 815-758-3711
With a copy to:
DEKALB Genetics Corporation
3100 Sycamore Road
Dekalb, Illinois 60115
Attn: John H. Witmer, Jr., Esq.
Senior Vice President and General Counsel
Fax: 815-758-6953
Notices shall be deemed to have been given: (i) on the date of receipt, if
delivered personally, or (ii) on the next business day after transmission, if
by telecopier (and appropriate confirmations have been received by the
noticing party). Any party hereto may change its address or telecopier number
specified above by giving written notice to the other parties hereto in the
same manner as specified in this Section 12(a).<PAGE>
<PAGE>
(2) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which together
shall constitute but one and the same instrument.
(3) Entire Agreement. Unless otherwise specifically agreed in
writing, this Agreement, the Stock Purchase Agreement, and the Exhibits and
Schedules attached hereto and thereto represent the entire understanding of
the parties with reference to the transactions set forth herein, and supersede
all prior representations, warranties, understandings and agreements
heretofore made by the parties, and neither this Agreement nor any provisions
hereof may be amended, waived, modified or discharged except by an agreement
in writing signed by the party against whom the enforcement of any amendment,
waiver, change or discharge is sought.
(4) Binding Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and assigns. This Agreement shall be assignable
by Licensee with Licensor's consent and Licensee shall have the right to grant
sublicenses of the Trademarks and the New Trademarks within the scope of the
Current Business and the terms and conditions of this Agreement without the
consent of Licensor. Licensor may assign this Agreement or any of the
Trademarks or New Trademarks; provided, however, that Licensor obtains
Licensee's prior written consent and Licensor's assignee expressly agrees in
writing to be bound by all of the terms and conditions of this Agreement.
(5) Governing Law and Attorneys' Fees. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Illinois. In any litigation, arbitration or other proceeding by which one
party to this Agreement seeks to enforce its rights under this Agreement
against the other party, the prevailing party in such action shall be entitled
to receive reasonable attorneys' fees and all other costs and expenses of such
proceeding.
(6) Captions. The captions of the various Sections and
subsections hereof and on the Exhibits attached hereto are for convenience of
reference only, and shall not affect the meaning or construction of any
provision hereof or of any such Sections or Exhibits.
(7) Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to
any party to this Agreement, nor shall any provision give any third persons
any right of subrogation or action over or against any party to this
Agreement.
(8) Severability; Construction. In the event any provision
hereof is determined to be invalid or unenforceable, the remaining provisions
hereof shall be deemed severable therefrom and shall remain in full force and
effect. Words and phrases defined in the plural shall also be used in the
singular and vice versa and be construed in the plural or singular as
appropriate and apparent in the context used.
(9) Equitable Relief. The parties hereto agree that the remedy
at law for any breach of the provisions of this Agreement will be insufficient
and inadequate to protect the respective interests of the non-breaching party
and that the non-breaching party shall be entitled, in addition to any other
right or remedy available pursuant to Section 12(j) hereof, to specific
performance of this Agreement and to any other injunctive or equitable relief
as may be determined by any court of competent jurisdiction.
<PAGE>
<PAGE>
(10) Arbitration. Except as provided in Section 12(i)
above, and except for any action between the parties relating to ownership of
the Trademarks or the New Trademarks (which shall be determined by a court of
competent jurisdiction), any dispute or controversy arising out of or relating
to this Agreement shall be decided by arbitration in Chicago, Illinois by the
American Arbitration Association under the Commercial Arbitration Rules then
in effect (the "Rules"). The parties hereto agree to select pursuant to the
Rules an arbitrator who possesses knowledge and expertise with respect to
poultry and the poultry industry. The decision in arbitration shall be final
and binding and may be enforced by any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"LICENSEE"
DEKALB POULTRY RESEARCH, INC.
By:
Name: Dr. Gary L. Waters
Title: President
"LICENSOR"
DEKALB GENETICS CORPORATION
By:
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
TRADEMARKS ISSUED - April 20, 1995 - DPRI
REG.
COUNTRY TRADEMARK OWNER REG. NO. CLASS DATE RENEWAL
Australia Chix Device DC A261639 31 9/5/72 9/5/07
Australia DEKALB-Warren DC A275897 31 2/4/74 2/4/09
Brazil Chix Device DGC 609245775 22 10/13/81 10/13/01
Bulgaria Chix Device DC 7125 29,31 8/29/69 8/29/99
Canada Chix Device DGC 159128 11/8/68 11/8/98
Canada DEKALB DK DGC 333400 10/23/87 10/23/02
Great Britain Chix Device DGC B945339 31 7/8/69 7/8/04
Japan Chix Device DGC 1751417 33 3/25/85 3/25/95(R)
Korea Chix Device DGC 20106 7 9/17/70 9/17/00
New Zealand Chix Device DGC B101311 31 7/31/72 7/30/07
Pakistan Chix Device DGC 54164 31 8/29/70 8/29/92(R)
Poland Chix Device DGC 49481 31 9/3/69 9/3/99
Singapore Chix Device DGC B62893 31 12/12/74 12/12/95
Thailand Chix Device DGC 49267 50 1/17/74 12/9/90(R)
<PAGE>
<PAGE>
EXHIBIT B - REVISED 6/2/95
TRADEMARKS ISSUED - April 20, 1995 - DPRI
REG.
COUNTRY TRADEMARK OWNER REG. NO. CLASS DATE RENEWAL
Argentina Chix Device DPRI 1717715 24 4/17/69 1/3/90(R)
Austria Chix Device DPRI 65117 31 8/22/69 8/31/99
Benelux Chix Device DPRI 38880 29,31 10/10/72 6/21/00
Bolivia Chix Device DPRI 41818 31 12/6/80 12/6/00
Bophuthatswana Chix Device DPRI B75/4086 31 8/4/85 8/4/95(R)
Chile Chix Device DPRI 307138 31 3/5/76 3/24/96
Colombia Chix Device DPRI 75828 31 2/8/72 2/7/02
Costa Rica Chix Device DPRI 54783 31 12/5/78 12/5/98
Cyprus Chix Device DPRI B20296 31 1/3/80 1/3/01
Czech Republic Chix Device DPRI 160141 31 2/8/71 6/12/00
Denmark Chix Device DPRI VR01.105/85 31 3/29/85 3/29/05
Ecuador Chix Device DPRI 755/91 31 12/29/71 11/24/95
El Salvador Chix Device DPRI 85 4a,93a 4/30/81 4/30/01
Finland Chix Device DPRI 102281 31 9/5/88 9/5/98
France Chix Device DPRI 1566125 31 1/20/70 12/19/99
Germany Chix Device DPRI 637680 31 2/8/71 7/31/99
Germany Chix Device DPRI 1011483 31 12/9/80 3/3/00
Ghana Chix Device DPRI 18623 31 10/3/79 10/3/07
Greece Chix Device DPRI 42620 29,31 9/17/69 9/17/99
Guatemala Chix Device DPRI 31133 31 9/3/76 9/2/96
Honduras Chix Device DPRI 49975 31 10/14/88 10/14/98
Hungary Chix Device DPRI 123834 31 9/6/83 1/27/03
Indonesia Chix Device DPRI 251215 31 8/8/79 7/10/99
Iran Chix Device DPRI 35769 29,31 8/20/70 8/20/00
Ireland Chix Device DPRI B79482 31 3/24/74 3/24/05
Italy Chix Device DPRI 570828 29,31 4/22/71 8/20/99
Jordan Chix Device DPRI 13019 31 7/28/71 7/28/06
Lebanon Chix Device DPRI 47192 31 3/17/70 3/17/00
<PAGE>
<PAGE>
Malaysia Chix Device DPRI M/B55641 31 10/21/70 10/21/05
Mexico XL DPRI 388166 31 1/26/90 1/26/95(R)
Mexico Chix Device DPRI 143497 18 4/30/68 4/30/03
Monaco Chix Device DPRI R839678 29,31 12/6/68 8/19/98
Nicaraqua Chix Device DPRI 8302C.C. 31 4/19/78 4/19/98
Norway Chix Device DPRI 80589 31 11/15/70 11/25/00
Panama Chix Device DPRI 20674 31 6/23/76 6/23/96
Paraguay Chix Device DPRI 139038 31 4/18/69 5/3/99
Peru Chix Device DPRI 31150 31 6/17/70 1/16/95(R)
Philippines Chix Device DPRI 57304 31 3/15/94 3/15/14
Portugal Chix Device DPRI 166631 31a 8/9/73 8/9/03
Puerto Rico Chix Device DPRI 15395 31 7/12/68 7/12/98
Romania Chix Device DRPI R7029 31 9/9/69 9/9/99
Russian Fed. Chix Device DPRI 41010 29,31 11/14/69 11/14/99
Saudi Arabia Chix Device DPRI 225/12 31 9/1/90 2/5/00
South Africa Chix Device DPRI B75/4086 31 8/4/75 8/4/95(R)
Spain Chix Device DPRI 592020 31 5/6/74 5/6/94(R)
Sri Lanka Chix Device DPRI 49987 31 10/1/90 9/11/95(R)
Sweden Chix Device DPRI 132144 31 7/17/70 7/17/00
Switzerland Chix Device DPRI 380217 29,31 2/27/70 2/27/10
Taiwan Chix Device DPRI 41231 72 6/1/70 5/31/90(R)
Transkei Chix Device DPRI B75/4086 31 8/4/75 8/4/95(R)
Turkey Chix Device DPRI 109257 12/18/68 12/18/98
US XL DPRI 1637740 31 3/12/91 3/12/01
US DEKALB DK DPRI 1319709 31 2/12/85 2/12/05
US Chix Device DPRI 867733 31 4/8/69 4/8/09
Uruguay Chix Device DPRI 232609 31 10/14/69 7/13/00
Venda Chix Device DPRI B75/4086 31 8/4/75 8/4/95(R)
Venezuela Chix Device DPRI 89522F 50 2/12/79 2/12/94(R)
Yugoslavia Chix Device DPRI 22217 29,31 5/25/77 5/25/97
<PAGE>
<PAGE>
TRADEMARKS PENDING - April 20, 1995
COUNTRY TRADEMARK STATUS CLASS DATE NUMBER
Brazil XL Filed May 31, 1993 817303146
Egypt DEKALB DELTA Requested 2/23/93 (Poultry
-on hold)
(DELTA Rejected)
India Chix Device Filed 12/18/86 462662
India DEKALB XL Filed 3/12/90 526029
(Poultry)
Japan Chix Device Requested 35,39,42 9/9/92 Servicemark
Japan DEKALB-Warren Requested 2/21/95
Sex-Sal-Links
Lebanon XL Filed 4/6/93 107/53861
(Poultry)
Slovenia Chix Device Filed 7/6/94 Z9470834
Vietnam Chix Device Filed 8/8/94 N-2809/94
EXHIBIT "C"
The New Trademarks
<PAGE>
EXHIBIT 11
COMPUTATION OF NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
For the nine months ended May 31, 1995 and 1994
May May
1995 1994
EARNINGS PER SHARE:
Shares
Average shares outstanding 5,157,731 5,140,385
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 82,784 77,196
Average number of common and common
equivalent shares outstanding 5,240,515 5,217,581
Net Earnings
Net earnings for primary earnings per share $11,886,000 $9,406,000
Earnings Per Share $2.27 $1.80
<PAGE>
<PAGE>
EXHIBIT 11
COMPUTATION OF NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
For the three months ended May 31, 1995 and 1994
May May
1995 1994
EARNINGS PER SHARE:
Shares
Average shares outstanding 5,169,684 5,142,026
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 96,521 96,391
Average number of common and common
equivalent shares outstanding 5,226,205 5,238,417
Net Earnings
Net earnings for primary earnings per share $5,351,000 $2,237,000
Earnings Per Share $1.02 $0.43
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations and the Consolidated Balance Sheets and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> MAY-31-1995
<CASH> (2,500)
<SECURITIES> 0
<RECEIVABLES> 112,200
<ALLOWANCES> 2,400
<INVENTORY> 89,600
<CURRENT-ASSETS> 205,200
<PP&E> 237,500
<DEPRECIATION> 139,700
<TOTAL-ASSETS> 349,800
<CURRENT-LIABILITIES> 122,900
<BONDS> 0
<COMMON> 500
0
0
<OTHER-SE> 126,800
<TOTAL-LIABILITY-AND-EQUITY> 349,800
<SALES> 294,300
<TOTAL-REVENUES> 294,300
<CGS> 148,500
<TOTAL-COSTS> 60,900
<OTHER-EXPENSES> 58,200
<LOSS-PROVISION> 2,800
<INTEREST-EXPENSE> 6,700
<INCOME-PRETAX> 17,200
<INCOME-TAX> 6,500
<INCOME-CONTINUING> 10,700
<DISCONTINUED> 1,200
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,900
<EPS-PRIMARY> 2.27
<EPS-DILUTED> 0
</TABLE>
